UK retail sales recorded a strong increase in January, building on December’s solid performance and indicating that consumer confidence carried into the start of the new year.
According to data released by the Office for National Statistics (ONS), retail sales rose 1.8% month-on-month in January, compared with a 0.4% increase in December. The figures exceeded market expectations and highlighted continued strength in household spending.
On an annual basis, UK retail sales climbed 4.5%, up from 1.9% in the previous month. The December annual figure was revised lower from an earlier estimate of 2.5%. Economists had forecast a modest 0.2% monthly increase and a 2.8% annual rise, making January’s data significantly stronger than expected.
The surge in retail sales late last year came as a surprise to many analysts. Strong online shopping activity played a key role, while the Autumn Budget presented by Chancellor Rachel Reeves helped reduce uncertainty around potential tax increases aimed at funding higher public spending.
Despite the recent momentum, the broader outlook for consumer spending in 2026 remains cautious. Persistent inflation pressures and a tight labor market are expected to limit household spending growth in the coming months.
Earlier this month, the Bank of England kept its benchmark interest rate unchanged at 3.75%. However, the narrow 5–4 vote within the Monetary Policy Committee, combined with easing inflation and subdued economic growth, has increased expectations that policymakers could move toward another interest rate cut as soon as March.
