Retail sales rebounded strongly in January 2025, reversing four months of declines, with volumes increasing by 1.7 percent, following a 0.6 percent decline in December 2024. This resurgence was primarily driven by food store sales, which soared 5.6 percentthe most significant monthly rise since March 2020. Retailers attributed this surge to more consumers dining at home. However, non-food stores experienced a 1.3 percent decline, with clothing and household goods retailers citing weak consumer confidence.

Despite the monthly improvement, the broader picture remains mixed. Over the three months to January 2025, sales volumes declined by 0.6 percent compared with the previous three-month period, reflecting subdued spending in November and December. Nonetheless, a year-over-year increase of 1.0 percent suggests some recovery in consumer activity.

E-commerce struggled, with online spending falling by 1.7 percent in January and 4.8 percent over the past three months, though total retail spending rose by 2.6 percent. As a result, the online share of retail sales dipped to 25.7 percent. While retail momentum appears to be recovering, pre-pandemic levels remain elusive, with sales volumes still 1.3 percent below February 2020 figures. The latest update takes the RPI to 39 and the RPI-P to 29, meaning that economic activities are well ahead of market expectations in the UK economy.

Retail sales are expected to post a moderate 0.3 percent rise on the month with a gain of 0.9 percent on year.

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.