Retail sales held up much better than expected at the start of the year. Following a steeper revised 1.2 percent monthly fall in December, volumes rose 0.5 percent, well above the market consensus and only their second increase since August 2021. Annual growth was minus 5.1 percent, up from minus 6.1 percent but sales were still 1.4 percent below their level just before the arrival of Covid.

Excluding auto fuel, the picture was little different with purchases advancing 0.4 percent versus December and falling 5.3 percent on the year.

January's partial rebound was wholly attributable to the non-food sector where, excluding auto fuel, sales rose 0.6 percent. The increase here was largely due to other stores (3.6 percent) but there were rises too in non-specialised stores and household goods (both 0.8 percent). Textiles and clothing (minus 2.9 percent) declined but auto fuel was up 2.0 percent. Food (minus 0.5 percent) contracted for a second month in a row.

Despite January's pick-up, volumes were still 0.5 percent below their average level in the fourth quarter so further gains will be needed if the sector is to provide a boost to current quarter GDP growth. Today's update puts the UK's ECDI at minus 16 and the ECDI-P at minus 2. In other words, economic activity in general is performing slightly weaker than the market anticipated.

Sales are expected to begin the year on a weak note, falling a further 0.3 percent on the month.

Retail sales measure the total receipts at stores that sell durable and nondurable goods. The data include all internet business whose primary function is retailing and also cover internet sales by other British retailers, such as online sales by supermarkets, department stores and catalogue companies. Headline UK retail sales are reported in volume, not cash, terms but are available in both forms. The data are derived from a monthly survey of 5,000 businesses in Great Britain. The sample represents the whole retail sector and includes the 900 largest retailers and a representative panel of smaller businesses, including internet sales. Collectively, all of these businesses cover approximately 90 percent of the retail industry in terms of turnover.

With consumer spending a large part of the economy, market players continually monitor spending patterns. The monthly retail sales report contains sales data in both pounds sterling and volume. UK retail sales data exclude auto sales.

The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

Retail sales not only give you a sense of the big picture, but also the trends among different types of retailers. Perhaps apparel sales are showing exceptional weakness but electronics sales are soaring. These trends from the retail sales data can help you spot specific investment opportunities, without having to wait for a company's quarterly or annual report.