The Retail Note - Retail sales: broken clock syndrome

Key Messages

• Jan figures slightly less impressive than reported
• YoY retail sales values +6.5%, volumes +5.5%
• But against very week comps (Jan 24: +0.4%, -1.1%)
• Headline MoM volume growth of +1.8% hugely misleading
• Still 9x higher than economist consensus forecasts (+0.2%)
• Implication that we spent more in Jan than Dec ridiculous
• Non-seasonally adjusted figures show MoM spend down -38%
• YoY grocery spend +3.9%, volumes +0.9%
• YoY non-food spend +5.4%, volumes +5.8%
• Implied food inflation +3.0%, non-food deflation -0.4%
• Strong month for Clothing, Jewellers, Charity Shops
• Soft demand for Textiles, Carpets, Off-Licences, Chemists
• Online sales +1.3% MoM, +14.7% YoY
• Online penetration declines by -10bps to 28.2%
• Rather than picking up, consumer demand is holding up.

Incredible. Not in the sense of amazing. More in the sense of not credible.

Today’s retail sales figures have not just surpassed expectations, they have smashed them. But sadly those expectations were largely built on sand and the numbers are being woefully misinterpreted. The figures are strong – but not for the reasons given. We have a broken clock situation whereby this is one of the two times in a day when the right time is being told.

Two questions to put everything into some perspective: if you are a retailer, where sales stronger in January or in December? If you are a consumer (which you are), did you spend more in January or over Christmas? For the handful that answered yes to either of those questions, I’m guessing many thousands (or millions) more answered no. Incredibly, the ONS figures suggest the opposite.

The reality

The facts seem a fair, if somewhat radical, place to start. Retail sales values (exc fuel) surged by +6.5% year-on-year (YoY) in January. Retail sales volumes (exc fuel) grew by +5.5%. In essence, we bought +5.5% more stuff in January this year than we did in the corresponding month in 2025 and spent +6.5% more. The best monthly performance in value terms since June 2023, in volume terms since a COVID-distorted January 2022.

So far, so seemingly good. But to add a bit of perspective to this (and take off some of the gloss), these growth figures were flattered by an incredibly weak comparable. Value growth in January 2024 was a paltry +0.4%, while volumes were down -1.1%. Last January’s figures were subject to massive retrospective downgrade when the ONS delayed release of last July’s monthly figures to “address quality assurance concerns”. In trying to reconcile the numbers with “seasonal adjustment” (spoiler alert, pet topic with much more on that to come), January’s and May’s figures really copped it. So, in essence, this January’s figures only really appear superlative as last January’s were so bad.

By the way, none of the above captured or even mentioned in the accompanying ONS narrative.

The great misrepresentation

Instead we got: “The quantity of goods bought (volume) in retail sales is estimated to have risen by +0.1% in the three months to January 2026, compared with the three months to October 2025. The rise was because of better automotive fuel sales over the three months to January 2026, and a good start to the year for non-food stores, which was only partly offset by falls in supermarkets. Retail sales volumes are estimated to have risen by +1.8% in January 2026, following a rise of +0.4% in December 2025 (unrevised from our previous publication) and a fall of -0.4% in November 2025 (revised down from a -0.1% fall in our previous publication). Growth in Janusary 2026 was partly because of artwork and antiques sales, alongside continued strong sales from online jewellers.”

Parking the rather ridiculous notion that we shunned supermarkets in January and splurged all our cash on antiques and fine arts, the headline figure here is that retail sales volumes increased +1.8% in January. This is the one figure that every economist clings to, the one that is recycled everywhere in the media, the one that completely dictates the narrative. But one that is about as plausible as us all treating ourselves to a new Picasso or Rembrandt in the January sales.

Economists got it spectacularly wrong. Consensus forecasts were for MoM volume growth of just +0.2%. The outturn was nine times stronger than that.  Repeat – nine times. But that really misses the point – which is that MoM comparisons of retail sales are utterly meaningless.

Retail sales volumes increased +1.8% in January. Really? That is effectively saying we bought and spent more in the dreary month of January than we did at Christmas. Of course, that is ridiculous, hence my two earlier questions.

This is all the result of ridiculous “seasonal adjustment” on the part of the ONS. For newcomers to the Retail Note, this is the notion whereby the ONS takes it upon itself to “smooth out” the seasonality of retailing in a vain effort to paint a true (or rather “economist-friendly”) picture of consumer demand. Unfortunately, this means expunging inconveniences such as Christmas out of the data – an inconvenience that is actually very much a reality for the high street.

Luckily, if we dig deep enough, the raw data is there to highlight the folly of these “seasonal adjustment” endeavours. In the ONS Pounds Data spreadsheet, non-seasonally adjusted retail sales values were £34.8bn in Jan (volumes £33.8bn). The equivalent figures for Dec were £56.0bn and £53.9bn. Reported growth of +1.8% versus a reality of a -37% MoM decline?

Effectively, the ONS is saying that retail sales in Jan grew by +1.8% compared to Dec, if you exclude Christmas. And, yes, that is ridiculous. It might be a perceived economic reality. It is not a high street one.

Performance by sub-sector

 Back in the real world of year-on-year comparisons, the usual mix of the weird and wonderful amongst the retail sub-sectors.

As collective wholes, both food and non-food enjoyed strong sales growth in January, albeit with different reads on inflation. Supermarket sales values grew by +3.9%, with volumes ahead by an encouraging +0.9%. The implied level of grocery inflation of +3.0% is in line with wider CPI and the direction of travel is down (vs. +3.7% in Dec).

Non-food saw sales values grow +5.4%, with volumes ahead +5.8%. In contrast to grocery, non-food was therefore deflationary (-0.4%). While the call across the economic and political communities is (rightly) for lower inflation, for the retail sector, deflation is a dangerous step too far, a sign that underlying consumer demand is weak and retailers are having to resort to discounting to keep the tills ringing. In terms of individual sub-sectors, deflation was particularly rife in PCs & Telecomms (-7.8%), Electricals (-5.4%), Music & Video (-5.2%), Sports & Toys (-2.3%) and Household Goods Stores (-1.6%).

The spectre of deflation takes some of the veneer off strong sales performance in these categories. But some did achieve the ‘holy trinity’ of value and volume growth and remain in inflationary territory. Chief amongst these were Second Hand Goods stores (values +34.6%, volumes +34.2%) – according to the ONS, a flight to antique shops rather than their charity equivalents? Other strong performing categories were Jewellery (+19.7%, +12.6%) and Clothing (+7.1%, +6.4%), so good news for two stalwarts of the high street.

At the other end of the performance spectrum, demand was soft for Textiles (-17.0%, -16.6%), Carpets (-9.8%, -11.1%), Off Licences (-8.2%, -8.4%) and Chemists (-5.3%, -6.9%).

Online sales values increased +1.3% MoM in January and by +14.7% YoY. Apparently, this was the largest year-on-year rise since April 2021, although the ONS did acknowledge that this was against a weak comparative, as online sales fell on both the month and the year in January 2025. As online MoM spend growth (+1.3%) lagged overall (but “seasonally adjusted”) retail sales growth of +1.6%, online penetration declined slightly from 28.3% in December to 28.2% in January.

For more detail, please refer to our accompanying Retail Sales Dashboard.

Some perspective

 Even if the focus is misguided and the numbers misrepresented, the tone of the ONS retail sales release was positive and this has fed through to the economist community and the media. Of course, we welcome positivity in retail and sentiment is very important. It’s just hugely ironic that it’s based more on false information than fact.

It’s always dangerous to get too carried away with one month’s retail sales figures, all the more so at this time of year. January and February are, in fact, two of the quietest months in the retail calendar, especially the latter (accounting for less than 7% of annual spend). The ONS may try to “seasonally adjust” otherwise and distribute actual spend made at Christmas to other months, but no amount of number-fudging can detract from retailing realities.

For all the economist euphoria around the January figures, I would say they were no stronger than December’s (YoY values +4.9%, volumes +3.1%) - and far less significant in the grand scheme of understanding the strength of consumer demand. The most telling figures of all remain those for 2025 as a whole – values up +3.4%, volumes up +1.8%. No seasonal adjustment, yet next-to-no coverage or acknowledgement in the media community.

January was decent, but far less strong than is being reported. In contrast, December and Christmas were way stronger than was reported. As was 2025 as a whole. As is consumer demand generally.

Rather than a perpetual cycle of misleading MoM peaks and troughs that tell us nothing, we need far greater understanding and more coverage of YoY comparisons. Rather than the broken clock being right twice a day, maybe it needs to be fixed so that it always tells the correct time?