After a disappointing end to 2023, retail sales in Great Britain exhibited a promising rebound in January. This surge suggests that the country’s economy has gained considerable momentum.
In this week’s blog, we’re exploring the current status of the UK economy and what lies ahead for retail in 2024.
Recession
The UK’s entry into recession was confirmed last Thursday, marked by two consecutive quarters of economic contraction. A significant contributor to this downturn was the disappointing performance of the retail sector. According to the latest data from the Office for National Statistics (ONS), the gross domestic product (GDP) shrank by 0.3% between October and December, surpassing economists’ projections of a 0.1% contraction.
Economic optimism
Despite the disappointing news, there are optimistic indicators pointing towards a hasty turnaround. In contrast to previous recessions – such as the global financial crash of 2008 and 2009 – analysts predict that the current economic downturn is likely to be mild and short-lived.
January saw a notable recovery, with retail sales volumes surging by 3.4%, countering the 3.3% fall in December 2023. The Office for National Statistics reported that this was the most substantial monthly increase since April 2021, effectively returning volumes to November 2023 levels. Notably, food stores, particularly supermarkets, played a pivotal role in this recovery.
Potential economic rebound
“There are signs the British economy is turning a corner; forecasters agree that growth will strengthen over the next few years, wages are rising faster than prices, mortgage rates are down and unemployment remains low.”
– Chancellor Jeremy Hunt
Bank of England governor, Andrew Bailey, also suggests that the recent uptick in retail sales could be a sign that the UK economy is picking up. Other factors such as falling inflation and rising wages in 2024 are expected to provide a solid foundation for recovery.
Targetfollow
The strong increase in sales suggests the worst is now behind the retail sector. In the meantime, we believe that businesses should remain invested in the most robust areas of the economy, as they offer the potential to weather the downside of a recession and participate on the upside potential of any risk-on event.
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