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Investing.com -- Retail sales in the UK rebounded in January, marking the first increase since August and surpassing expectations, the official data released Friday showed.
Sales volumes rose 1.7% from the previous month, significantly exceeding the 0.3% increase predicted in a Reuters poll of economists.
The surprise jump in retail activity led to a modest gain in sterling, which rose nearly a fifth of a cent against the US dollar following the data release from the Office for National Statistics (ONS) on Friday.
“The 1.7% m/m leap in retail sales volumes in January suggests the retail sector shot out of the blocks at the start of the year,” said Paul Dales, an economist at Capital Economics.
"But some of that strength will have come at the expense of weakness in other parts of the economy. And with households in a fairly glum mood, we doubt it will last," he added.
The consultancy forecasts that real consumer spending will rise by 0.8% in 2025, following a similar 0.7% increase in 2024.
The January’s monthly sales jump was the fastest since last May. Retail sales volumes for the three months to January fell by 0.6% compared to the prior three-month period, reflecting the weakness that weighed on the sector late last year. On an annual basis, sales were up 1%, ahead of the 0.6% growth forecast.
Major British retailers, including Next (LON:NXT) and Marks and Spencer Group PLC (LON:MKS), have warned of a more challenging year ahead as tax increases for employers and their potential effects on prices and jobs ripple through the economy.
Earlier this week, data showed UK inflation in January rose more than anticipated, while hiring and wage growth also outpaced expectations. Meanwhile, the Bank of England (BoE) has signaled a cautious approach to monetary easing, halving its growth forecast for 2025 and emphasizing that future rate cuts will be gradual.