UK retail sales rebound after Christmas slump; NatWest profits jump 20% – business live

The 3.4% rise in UK retail sales volumes last month shows the Bank of England must tread carefully, says Neil Birrell, chief investment officer at Premier Miton Investors:

“UK retail sales for January provided the third data point in three days on the UK economy and painted a somewhat ambiguous picture, coming in much stronger than expected.

The consumer sector bounced back strongly after a weak Christmas period and these numbers suggest that ongoing higher interest rates are not having the dampening effect that was anticipated. The Bank of England will tread a careful path in its decision making as these numbers do not provide them with much clarity.”

Today’s data should cheer retailers, reports Stuart Chalmers, retail industry lead at Accenture UK & Ireland:

“Retailers will be pleased to see this boost at the start of the year, in a week that brought the unwelcome news that the UK has entered a technical recession. Sales rose in most subsectors, with food stores and supermarkets contributing most, but clothing retailers will be disappointed to see a drop in numbers.

January’s retail performance will offer hope to a beleaguered sector after a challenging ‘golden quarter’. With inflation continuing to hold steady, retailers should be using data to better understand what customers want, and when they want it. This approach can help to inform their broader strategy, including in their supply chains, through to in-store experiences.”

But Lisa Hooker, leader of industry for consumer markets at PwC, cautions that a sustained economic recovery is months away:

At first glance, January’s retail sales figures appear to contrast with the declining footfall and challenging trading conditions reported by some retailers. However, compared to the rest of the year, it is a much less important month of trading, so these numbers are more reflective of a return to the weak trend of growth we saw in the second half of 2023, rather than the start of a prolonged recovery.

While many of the macroeconomic indicators are positive - falling inflation, improving consumer sentiment, the prospect of lower interest rates - consumers remain cautious about spending, particularly in discretionary and big ticket categories, and we do not predict a sustained recovery until the second half of 2024.”

NatWest has also warned that “the economic outlook remains uncertain”, telling shareholders:

We will monitor and react to market conditions and refine our internal forecasts as the economic position evolves.

The bank is also predicting that income will fall this year.

For 2023, it made total “income excluding notable items” of £14.3bn, a 9.8% rise.

But for 2024, NatWest says it expects income excluding notable items to drop to be between £13bn and £13.5bn.

NatWest, the bank partly owned by the UK government, has reported a jump in profits this morning – and named its permanent CEO.

The taxpayer-backed lender grew its operating profits by 20% year-on-year in 2023, its latest financial results show.

This is NatWest’s highest annual profit since the financial crisis (when the bank, then called Royal Bank of Scotland, was bailed out by the taxpayer), and more than the £5.95bn expected by analysts.

This could cheer the government as it gears up to sell its remaining stake in the lender to the public this year.

NatWest has also appointed Paul Thwaite as its chief executive. Thwaite has been doing the job on an intermi basis since the resignation of Alison Rose last summer over the closure of Nigel Farage’s bank accounts with Coutts, NatWest’s private bank.

Good morning, and welcome to our rolling coverage of business, the financial markets and the economy.

With Britain now in a technical recession, economic data will be closely scrutinised for signs that the downturn could be ending.

And the latest retail sales figures, just released, show that retail sales across Great Britain grew at the fastest rate since April 2021 last month, as consumers returned to the shops after a pre-Christmas slump.

Retail sales volume rebounded by 3.4% in January, the Office for National Statistics reports. That follows a record 3.3% tumble in retail spending in December, which flashed warning signs over the economy a month ago.

It could be a sign that the UK economy is picking up – as Bank of England governor Andrew Bailey has suggested – after shrinking in the second half of last year.

The ONS reports that sales volumes in all subsectors, except clothing stores, increased in January.

Food stores such as supermarkets contributing most to the increase, with food stores sales volumes rising by 3.4% over the month.

The ONS says some of the fall in December was because of consumers purchasing Christmas gifts earlier, during the November Black Friday discounts.

But separate ONS polling did find that almost half of adults had expected to spend less on Christmas shopping because of the rising cost of living.

Heather Bovill, deputy director for surveys and economic indicators at the ONS, says:

“After a very weak December, retail sales rebounded in January with the largest monthly rise since April 2021. This means that overall sales have now recovered to pre-December levels, although if we look at the broader picture, they are still below where they were pre-pandemic.

“Sales increased across nearly all retail sectors, and it was a particularly strong month for supermarkets. Household goods stores, sports shops and department store retailers were amongst those reporting robust trading due to January sales promotions. A fall in prices at the pump also meant a solid month for fuel sales.

“Clothing shops were the only area not to see growth this month.”

The agenda

• 7am GMT: UK retail sales for January

• 1.30pm GMT: US PPI index of producer price inflation for January

• 1.30pm GMT: US building permits and housing starts data for January