U.K. retail sales rose 1.4% year over year in January, but with inflation squeezing household budgets, growth was fueled by spending on food while sales of nonfood items remained weak, data released Feb. 6 showed.
On a like-for-like basis, sales for the month increased 0.6% year over year, according to a report by the British Retail Consortium and KPMG.
Over the three months to January, food sales increased 2.9% year over year, or 4.1% on a like-for-like basis, while in-store sales of nonfood items shrank 2.9%, or 3.6% on a like-for-like basis.
"The figures paint the same old picture of divided fortunes for food and nonfood sales," BRC CEO Helen Dickinson said in a statement. "Rising food prices continued to inflate sales growth and absorb the lion's share of shoppers' squeezed budgets."
The annual rate of inflation in the U.K. in December 2017 was 3.0%. Prices have edged up due to the higher cost of imports following a drop of more than 15% in the value of the British pound versus the U.S. dollar in the wake of the country's decision in a June 2016 referendum to leave the European Union. Sterling has retraced some of those losses and is down less than 7% from its pre-vote level.
Online sales of nonfood items continued to grow, increasing 5.3% year over year in January while the penetration rate climbed to 22.2% from 21.9% in January 2017.
"For many retailers, online sales have taken the sting out of the challenging trading environment," Paul Martin, head of retail at KPMG, said in the same statement. "It's therefore not surprising to see many retailers rethink their physical presence. Ensuring you can deliver a customer-centric and channel-agnostic proposition will increasingly split the winners from the losers in 2018."
