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UK Retail Sales Soar in January: Biggest Leap Since 2021 Signals Economic Revival

UK retail sales experienced a significant surge of 3.4% month-over-month in January, marking the most substantial increase since April 2021, as reported by the Office for National Statistics (ONS). This rise, the largest recorded since 1996 excluding the pandemic period, exceeded economists' expectations of a 1.5% increase. This rebound compensates for the sharp downturn seen in December, where sales fell by 3.3%, contributing to the UK's descent into a mild recession.


The ONS highlighted that January's sales boost was primarily fueled by discounts offered by numerous retailers. Sales rose across various sectors, with the notable exception of clothing stores. Supermarket food sales made the most significant contribution to this sharp recovery, bringing overall sales volumes back to their November 2023 levels, though they still remain below pre-pandemic levels. Moreover, a decrease in fuel prices led to a strong month for fuel sales.


Our Perspective: These figures corroborate some of the more positive cyclical data emerging from the UK recently and reinforce our opinion that the Bank of England (BoE) will be among the last central banks to reduce rates, likely not until after the summer break. This development also bolsters our supportive outlook for the GBP.


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