Will UK households enjoy a better year in 2024?

January’s jump in retail sales provided a glimmer of positive news about the health of the UK consumer on Friday after grim data earlier this week showed the country slid into recession at the end of 2023.  

But analysts were quick to caution against overly optimistic conclusions from the sales volumes, which rose at a month-on-month pace of 3.4 per cent, given the broader picture of stagnation that continues to hang over Britain.

Retail sales may well gain further momentum in the coming months as real incomes grow alongside falling inflation, but this is unlikely to translate into stellar growth given the underlying weakness in UK productivity. 

With the Bank of England forecasting that gross domestic product will expand by just 0.25 per cent this year, the country is a long way from finding its way out of the low-growth trap that seems likely to bedevil the ruling Conservatives in the election expected this year. 

The pressure on Prime Minister Rishi Sunak to meet his pledge to “grow the economy” was underscored overnight with the loss of two more seats to Labour in by-elections in England.

“We would be reluctant to assume that this signifies the return of a rip-roaring consumer economy,” said Ellie Henderson, economist at Investec. 

The bounce in retail sales volumes reversed a sharp fall of 3.3 per cent in December, leaving them hovering at similar levels to November 2023. Analysts said difficulties in seasonally adjusting numbers around the close of the year might have contributed to the gyrating figures. 

“The rapid rebound suggests the dip was more likely down to the ever-shifting seasonal trends in spending, which have continued to change pace since Covid-19,” said James Smith, economist at ING bank. 

In addition, volumes remain 1.3 per cent below pre-pandemic levels, confirming the broader picture of stagnation that was painted by Thursday’s GDP data. In 2023, overall household consumption increased by just 0.3 per cent, according to…