The UK retail sector remained under pressure in January, with sales volumes continuing their downward trend for the fourth consecutive month. Retail sales volumes declined year-over-year at a faster pace (minus 24 percent, compared to minus 15 percent in December), with expectations of a similar contraction in February (minus 26 percent). Seasonal sales also fell short of norms, highlighting weak consumer demand.

Internet sales faced a steeper decline, dropping by minus 22 percent compared to minus 8 percent in December, and are projected to plummet further in February (minus 46 percent), reflecting shifting consumer spending patterns or reduced discretionary income. Total distribution sales, encompassing retail, wholesale, and motor trades, experienced the sharpest annual contraction in a year (minus 32 percent), with no anticipated improvement next month.

These findings underline the challenging environment for retailers, exacerbated by inflationary pressures, subdued consumer confidence, and possibly higher borrowing costs. Poor sales volumes, both online and in stores, signal broader economic strain affecting consumer behaviour. With no imminent recovery expected, the retail sector faces a pivotal period where businesses may need to adapt to mitigate ongoing challenges. The latest update leaves the RPI at minus 26 and the RPI-P at minus 31, meaning that economic activities remain well behind market expectations.

The Confederation of British Industry (CBI) produces a monthly survey (and a more detailed quarterly report) analysing the performance of the UK retail, wholesale and motor trade sector. Volume sales, orders on suppliers, sales for the time of year and stocks are all covered and the quarterly survey also covers imports, selling prices, numbers employed, investment and business situation. Financial markets tend to concentrate on the CBI's annual sales growth measure as a leading indicator of the official retail sales report.

This survey is a leading indicator of consumer spending because retailer and wholesaler sales are directly influenced by consumer buying levels. The monthly update provides a vital update on volume of sales, orders and stocks. Like the industrial survey, it carries significant weight in the formulation of economic policy at the Bank of England and within government as a highly respected barometer of high street trade. It is considered to be an advance indicator of retail sales although it is not well correlated with the official data on a monthly basis.