Inflation Undermines UK’s Post-COVID Shopping Rebound

The receding of the omicron variant of the coronavirus in the United Kingdom has prompted shoppers to return to brick-and-mortar stores, but inflation is blunting their buying enthusiasm, according to new data released by the U.K. Office of National Statistics (ONS).

The agency reported a 1.9% increase in January sales. For December, sales declined 4%.

“The solid rise in retail sales volumes in January adds to the signs that the omicron-induced hit to activity was smaller and shorter-lived than previously thought,” Adam Hoyes, an economist at Capital Economics, reportedly told Reuters. “Even so, the cost of living crisis means the outlook for retailers is anything but bright.”

Comparing January to December, the ONS reported that prices of fuel and items at non-food stores and online sellers were up. Growth was especially strong at home improvement retailers. Sales at food stores were down.

The return of diners to restaurants resulted in the decline in non-restaurant food sales, an analyst told Reuters.

“More people returned to eating out, and there was also anecdotal evidence suggesting higher demand for takeaways and meal subscription kits,” Darren Morgan, an ONS economist reportedly told Reuters.

The ONS data showed two measures of inflation increasing at their highest monthly year-over-year rate in 20 years.

The Consumer Prices Index was up 5.5 percent for the 12 months through January and showed owner-occupied housing costs increased 4.9% in the same period.

A third measure of inflation, Owner Occupied Housing Costs, was up 2.4% for the 12 months through January. The January rate was the highest since January 2018.

The data also included information about the portion of sales that occurred through online retailers.

Overall, February online retail sales comprised 25.3% of overall retail in the U.K. compared with 39.4% of overall retail sales in January 2021. Online retailers garnered 9.5% of total food sales compared with 12.2% in January 2021.

Online retail sales also garnered 20.8% of non-food sales compared with 39.4% in January 2021; 23.8% of department store sales compared with 37.4% a year earlier; 23.7%of textile, clothing and footwear sales compared with 50% a year earlier; and 20.5% of household good sale compared with 31.5% in January 2021.