Market report: UK retail sales bounce but shoppers still frugal
Susannah Streeter, head of money and markets, Hargreaves Lansdown: ‘’There’s more spring in the step of the retail sector, as sales surged by more than expected in January, as shoppers appear to defy the gloom and bought more food to cheer up the long winter nights. They also bought more from online retailers compared to last January, browsing deals from the comfort of the sofa, with volumes up 0.8% year on year. But there are still signs that shoppers are showing frugality. People have been eating in more, instead of dining out, shunning spending in restaurants. Bargain hunting is still in fashion, with consumers sniffing out cheaper prices in markets, stalls and from online sellers, with non-store retailers seeing volumes rise 2.4%. After an encouraging spurt of activity in December, tougher times have returned for clothing, homeware and department stores with volumes falling for non-food stores by 1.3% on the month. Splashing out on a new outfit or furnishings has falling down shopping lists amid concerns about the economic outlook However, there are some signs that the pessimistic attitudes may be fading a little. GfK’s monthly consumer confidence index edged up in February, as consumers took heart from the interest rate cut, hoping for better times ahead. But the improvement from -20 is from a low base given January’s reading of -22 was the lowest level in just over a year. Despite the overall retail sales rise, the data doesn’t little to change the picture of a stagnating economy, but there are now glimmers of light at the end of the tunnel, especially with more interest rates expected this year. The pound initially rose sharply against the dollar, as the new retail snapshot came through but lost a little ground and is still trading around $1.26.
The latest UK government borrowing figures underline the tight spot the chancellor Rachel Reeves is in. Although on the face of it the surplus of £15.4 billion looks super-healthy, given that it’s the highest for the month since records began, it still undershot forecasts by £5.1 billion from the Office for Budget Responsibility. Tax receipts came in lower than expectations which is likely due to the recent weakness with the economy barely growing in the last three months of the year. It means the chancellor is between a rock and a hard place. To keep faithful to her fiscal rules it looks even more certain likely she will have to increase taxes, cut spending or attempt a juggling act of both.
It’s been another lacklustre start to trading for the FTSE 100 at the end of what’s been a disappointing week for London listed stocks. The index is trading flat, with little momentum around to drive it higher. Investors look set to take cues from Wall Street, with the S&P 500 set to fall back further as optimism takes a back seat. The prospect of US trade policy reigniting inflation is front of mind and the unpredictable state of geo-politics is also causing uncertainty.
Oil prices have stayed elevated above $76 a barrel as supply concerns swirl. A drone attack on part of a pipeline complex in Kazakhstan a key crude export route has led to sharply lower flows from Russia, leading to expectations of greater demand from other producers. The OPEC+ cartel is also considering delaying an increase in production, given the concerns about medium term demand amid worries over the impact of Trump’s tariffs on the global economy.’’