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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Retailers face tough 2022 despite sales rebound; FTSE 100’s worst week since November; NatWest back in profit – as it happened

NatWest United Kingdom United States Office for National Statistics Ukraine EDF Europe France London Germany
Shoppers walk in Slough High Street last month
Shoppers walk in Slough High Street last month Photograph: Maureen McLean/REX/Shutterstock

Closing post

Time to wrap up - here’s some of today’s main stories.

Goodnight, and stay safe. GW

Shares in streaming company Roku have tumbled by a quarter today, after it missed revenue forecasts last night and issued underwhelming guidance.

Roku is one of the ‘pandemic winners’ that have found conditions more challenging of late (see also Peloton, Shopify, Zoom...).

Last night it reported that revenue growth slowed in the last quarter, to 33% year-on-year, from 51% in Q3.

For the current quarter, it forecast revenue of $720m, which implies 25% revenue growth, below expectations of $748.5m.

Shares have slid over 25% today to $108 - last July, they hit a record high of $490, before the boom in fast-growing tech firms faded.

As Bloombert puts it:

It’s a sharp reversal for Roku, which was among the stay-at-home winners amid the Covid-19 pandemic that shuttered cities for months on end. The stock gained nearly 150% in 2020 as the coronavirus accelerated a shift toward streaming video among consumers. Investors are now reassessing the valuation it had received, as they rotate out of high-growth tech names.

“At a time when interest rates were near zero and retail money poured into the equity markets, Roku was a perfect stock to own,” wrote Michael Nathanson, an analyst at MoffettNathanson, who has a sell rating on the stock. He noted that Roku had some blockbuster quarterly reports in the pandemic era, helped by growth in streaming video. “As the enterprise value pushed higher and higher, it just became harder and harder to justify that valuation.”

Pret a Manger’s future hangs in balance after new cash call

A Pret a Manger in New Cavendish Street,London
A Pret a Manger in New Cavendish Street,London Photograph: Hannah McKay/Reuters

Pret a Manger’s owners have warned of doubts over its ability to continue as a going concern as the coffee shop chain faces uncertainty over future Covid restrictions and a shift to hybrid working.

Accounts for Pret’s UK holding company filed this week show that last month it doubled its “standby facility” reserved to support the business in case of difficulty to £200m, up from the £100m set aside in March last year.

The latest cash call on shareholders comes on top of £100m pumped into the business in the autumn and £185m in 2020 when the company first warned of “material uncertainties” as sales were crushed by the pandemic.

In the holding company accounts, which were signed off on 10 February, directors said there were still “material uncertainties which may cast significant doubt over the group’s ability to continue as a going concern”.

They said that the possibility of further trading restrictions linked to Covid-19 and the associated unpredictability of consumer behaviour as well as uncertainty about the group’s ability to refinance a debt facility that expires in July next year were potential clouds over its financial position.

The group, which had debts of almost £400m at the end of 2020, has been dramatically affected by the pandemic, during which it was forced to close some outlets for several months. The London-focused business has also been hit by the shift to working from home and a decline in tourist numbers in the capital.

European stock close lower

Ukraine worries pulled all the main European indices down by the close of trading.

Germany’s DAX fell almost 1.5%, Spain’s IBEX lost almost 1%, Italy’s FTSE Mib shed 0.6%, while France’s CAC only lost 0.25%, as the early rally fizzled out.

Michael Hewson of CMC Markets

European markets initially had a more positive tone today, ahead of the weekend as the negativity from yesterday started to be replaced by cautious optimism that there will be no further negative developments ahead of next week’s meeting between US Secretary of State Anthony Blinken, and Russian Foreign Minister Sergey Lavrov.

Unfortunately, the early gains soon disappeared on reports that separatist leaders in Eastern Ukraine were evacuating their citizens in the region into Russia for their own safety.

FTSE 100 posts worst week since late November

In the City, the FTSE 100 has closed 24 points lower at 7514 points, down 0.3% today.

That takes the blue-chip index’s losses this week to 1.9%, after a big fall on Monday. It’s the worst week since late November when the discovery of the Omicron variant rocked markets.

Russian steel manufacturing business Evraz was the top faller today, for the second day running, down 7.2%.

Technology-focused firms also lost ground, with industrial software company Aveva losing 6.3% and online grocery operation Ocado off 4.4%.

Travel companies were also pulled lower by the Ukraine crisis, with IAG (which owns British Airways) losing 2.9%.

The smaller FTSE 250 index lost 0.9%, with holiday firm TUI dropping 5.3%.

Stocks turned lower after the head of the Russia-backed separatist states in Ukraine announced a mass evacuation of citizens. The move could be part of a plan to trigger a Russian intervention in Ukraine.

Here’s the situation across UK travel, with rail, road and ferry operators urging people to avoid journeys due to disruption caused by Storm Eunice:

Luxury brand Hermès plans new factories as handbag demand soars

Hermès, the French luxury goods maker, is opening three new factories as it struggles to keep up with demand for its £5,000-plus Birkin and Kelly handbags.

The company said on Friday it planned to open new leather goods factories in the French towns of Louviers, Sormonne and Riom before 2024 in order to increase and speed up its production of the expensive bags.

It has also recently opened its first leather-working school to train more craftspeople in the art of handbag making.

The company, which already has more than 4,300 leather workers on its staff, said it was hiring more than 400 artisans each year. However, Hermès said it needed far more to keep up with demand for its handbags, which has jumped during the Covid pandemic as soaring stock markets have left the world’s richest people with a lot more disposable income.

Shares in Hermès have dropped 5% today, after it reported that production bottlenecks had hit sales at its leather goods and saddlery division.

Eurozone consumer confidence edges down

European consumers have grown a little less optimistic this month, indicating that inflation, and the Ukraine crisis, may be hitting morale.

The Europen Commission’s monthly gauge of consuer confidence in the European Union dropped by 0.2 points to -10.2 this month. In the euroarea it dipped to -8.8, from -8.5.

At these levels, the indicator is converging towards its long-term average, the EC says. It slumped early in the pandemic, but then recovered after the first lockdowns were lifted.

Eurozone consumer confidence
Eurozone consumer confidence Photograph: EC

Updated

Cash buyers drive surge in US existing home sales in January;

US home sales have jumped in January, with cash buyers squeezing out prospective first-time house owners.

Sales of existing homes (ie, not new builds) jumped 6.7% last month, to a seasonally adjusted annual rate of 6.50 million units.

The average price hit $350,300, up 15.4% from January 2021, lifted by record low inventories, pressure to secure deal before interest rates rise, and cash-rich buyers.

Lawrence Yun, NAR’s chief economist, explains:

“Buyers were likely anticipating further rate increases and locking-in at the low rates, and investors added to overall demand with all-cash offers.

Consequently, housing prices continue to move solidly higher.”

First-time buyers were squeezed out of the market - responsible for 27% of sales in January, down from 30% in December and down from 33% in January 2021.

Each of the four major U.S. regions experienced an increase in sales in January.

However, year-over-year, activity was mixed - down 2.3% overall, with sales lower in the Northeast and West, flat in the Midwest and up year-on-year in the South.

Back in the UK, John Lewis shops in Cardiff, Exeter and Bristol’s Cribbs Causeway shopping centre did not open because of Storm Eunice today while Waitrose outlets in Saltash, on the Cornish border, Farnham in Surrey, and Hawkhurst in Kent also temporarily closed.

Waitrose said that local branches were deciding whether to go ahead with home deliveries depending on weather conditions in the area.

A trader at the New York Stock Exchange
A trader at the New York Stock Exchange Photograph: Xinhua/REX/Shutterstock

On Wall Street, stocks have dipped in early trading, as uncertainty about inflation, rising interest rates and fears of conflict in Ukraine all weigh on markets

The Dow Jones industrial average has dropped by 53 points, or 0.16%, a day after sliding 1.8% in its worst fall of 2022.

The tech-focused Nasdaq is 0.25% lower.

Craig Erlam of OANDA says news that US Secretary of State Antony Blinken is ready to meet with Russian Foreign Minister Sergey Lavrov next week has calmed markets.

Risk aversion swept through the markets on Thursday as the perceived risk of a Russian invasion of Ukraine rose. Much like the weather here in London, Friday was shaping up to be rather treacherous in the markets, that is until US Secretary of State Antony Blinken accepted an invitation to meet Russian Foreign Minister Sergei Lavrov in Europe next week.

While we’re still being warned that a Russian invasion is highly likely, the meeting does offer hope that nothing will happen before then which is bringing some stability in the markets. In the absence of the meeting, it could have been another turbulent day in the markets and we could still see some risk aversion creeping in as we near the close, given how quickly these situations can change.

Two more UK energy suppliers, Whoop Energy and Xcel Power Ltd, have ceased trading today.

Whoop Energy supplies 212 business customers, and 50 domestic accounts, while Xcel Power supplied gas to 274 businesses.

Regulator Ofgem says that under its safety net, customers’ energy supply will continue and funds that domestic customers have paid into their accounts will be protected, where they are in credit.

Domestic customers will also be protected by the energy price cap when being switched to a new supplier, which will be chosen by Ofgem.

A burning ship carrying almost 4,000 cars – including 1,100 Porsches – has been drifting in the mid-Atlantic after the vessel’s 22 crew members were evacuated, the Portuguese navy has said.

The ship Felicity Ace, which was carrying a number of Volkswagen Group vehicles from Germany to the US, caught fire near the Azores on Wednesday evening, a VW spokesperson said on Friday.

None of the crew members evacuated on Wednesday were hurt, Portugal’s navy said.

UberEats have also paused deliveries where there is a Red weather warning, meaning winds are most severe and dangerous today:

“Due to the severe weather conditions we have temporarily paused the Uber Eats app in locations where a Red weather warning is in place.

Our local teams are closely monitoring the situation and we hope to resume services as soon as it is safe to do so.”

Updated

Supermarket chain Morrisons says it had paused using larger lorries for deliveries in “red” areas of the UK, where wind speeds are highest in today’s storm.

Its home delivery vans are driving more slowly in those areas for safety reasons, so the number of drops will reduce, potentially causing some delays.

Eurozone builders had a poor end to 2021, as the surge in Covid-19 cases hit the economy.

Production across the construction sector fell by 4.0% month-on-month in the euro area, and by 3.1% in the wider EU.

Construction work in Austria, which imposed a full lockdown in November, shrank by 8.1%. Production was down 7.3% in Germany, which brought in restrictions on unvaccinated citizens.

Deliveroo has also temporarily halted some deliveries due to storm Eunice.

The delivery firm says it has paused deliveries in London, Wales, the south west and parts of the south east in the interests of rider safety.

Household spending on holidays and travel jumped in January compared with a year earlier, according to analysis by Britain’s biggest building society, via PA Media.

Spending on holidays increased by 379% annually in January, while spending on airline travel was up by 408% and spending on cruises surged by 899%, Nationwide Building Society said.

The report was based on an analysis of nearly 200 million debit and credit card and direct debit transactions made by Nationwide’s members in January

It shows the difference compared to a year ago, when the UK was in a strict lockdown and Covid vaccines were just being rolled out.

Mark Nalder, Nationwide’s head of payments, said spending on holidays, airline travel and cruises is playing a big role in rising spending levels “as consumers start 2022 in a positive frame of mind about the outlook for Covid-19 and about their travel plans for the coming year”.

He added:

“The rising cost of living also continues to slowly bite into consumers’ pockets with spending on utilities and bills, including energy, water and tax bills, up more than a quarter compared to December but, perhaps more importantly, up nearly 10% on the same month last year.

“Spending on paying off existing debts, such as credit card bills, also increased in January as people look to try and pay down debt racked up in the run-up to Christmas.”

Mr Nalder said spending is expected to grow in February as “the return to offices boosts spending in areas such as travel, eating and drinking and leisure and recreation”.

Holiday firm TUI reported a jump in bookings earlier this month:

Storms push down power prices, lift wind output

The storms hitting the UK and Europe are also pushing down power prices, as wind turbine output jumps.

Electricity prices for the next few days in Europe have plunged, Bloomberg reports, as the region’s wind turbines are poised to generate some of the highest levels ever seen.

They say:

Day-ahead power in Germany, Europe’s biggest market, plunged as much as 66% to its lowest level this year. Output from Germany’s wind parks will double by early Saturday compared with actual output on Friday morning, according to a forecast by Bloomberg.

The cost of electricity has dropped from records in December, but Europe’s many millions of homes and factories are still facing record bills for this winter. The absence of any real cold spells this year also helped depress prices.

In the UK, wind is currently generating 33% of electricity, pushing the overall renewables contribution over 40%:

UK power generation, February 18 2022
UK power generation at 11.45am this morning Photograph: National Grid

Updated

A sign during Storm Eunice, in Brighton this morning.
A sign during Storm Eunice, in Brighton this morning. Photograph: Peter Nicholls/Reuters

Takeway courier group JustEat and fast track grocery firm Getir have both suspended deliveries in parts of the UK most affected by Storm Eunice.

JustEat said it had temporarily ceased operations in London, Cambridge, Brighton, Wales, and the South West, as one of the worst storms in decades hits the UK.

A JustEat spokesperson said:

“Courier safety is our number one priority and we have immediately suspended deliveries in all affected areas today. We will not reopen until it is safe to do so.”

Getir said it was pausing deliveries in London and “affected areas across the south of England” because of the danger posed to its workers.

Turancan Salur, general manager for the UK said

“At Getir, the safety and wellbeing of our employees come first, and we will continue to assess the situation and follow the latest guidance before resuming operations. We apologise to customers for any inconvenience caused by this momentary pause and look forward to resuming operations once it is safe to do so.

All couriers, and other employees affected by closing for the storm, will continue to receive their full pay.”

Here’s our liveblog on Storm Eunice:

Updated

Oil drops on hopes of Iran deal

Back in the markets, the oil price has dropped to its lowest level in a week.

Brent crude is down 2.5% at $90.60 per barrel, on hopes of a breakthrough in the Iran nuclear deal negotiations. US crude has dropped back through $90/barrel.

Yesterday, a US State Department spokesperson told AFP that “substantial progress has been made in the last week,” in the talks in Vienna.

If Iran’s 2015 nuclear agreement can be revived, then the eventual lifting of sanctions could see Iranian oil return to the markets again.

Oil hit seven year highs on Monday, on worries that conflict in Ukraine was imminent, but has slipped back since.

Stephen Brennock at brokerage PVM Oil says (via Reuters):

“For all the talk of war and conflict, market players remain unconvinced. This is perhaps why the geopolitical risk premium is starting to wane,”

Updated

Warehouse group Segro sees surge in demand for quick delivery

A Segro warehouse at Rainham, Essex.
A Segro warehouse at Rainham, Essex. Photograph: Martin Godwin/The Guardian

Elsewhere in retail, the boom in rapid delivery services and online shopping has pushed up profits at British warehousing firm Segro.

Segro, whose warehouses are scattered across the UK and continental Europe, reported a 20% jump in adjusted profits for 2021, while an earnings measure that tracks the value of its buildings surged by 40%.

Segro says it saw record levels of rental growth last year, and a £4.1bn increase in the value of its portfolio.

Demand to rent Segro’s properties jumped in the lockdown, as more customers shopped over the internet.

As chief executive David Sleath told us late last year:

“We get everyday things. That could be a coffee cup, or it could be something you’ve downloaded on your phone that’s gone through a data centre...

We create the space to enable extraordinary things to happen.”

Segro says that ‘quick-commerce’ (where customers can order goods to arrive almost immediately) is driving growth too.

E-commerce is still an important source of occupier demand across Europe and continues to contribute significantly to our lettings performance, but we are seeing new names emerge in the space (for example rapid grocery delivery services and other ‘q-commerce’ businesses) and its impact is now being felt more widely across the portfolio, for example in our urban estates in Germany, France and Spain.

Updated

EDF launches €2.5bn cash call after price cap and nuclear plant problems

Electrical power pylons of high-tension electricity power lines next to the EDF power plant in Bouchain, near Valenciennes, France.
Electrical power pylons of high-tension electricity power lines next to the EDF power plant in Bouchain, near Valenciennes, France. Photograph: Pascal Rossignol/Reuters

In France, power company EDF raising €2.5bn to strengthen its finances, after being forced to sell power below market prices to protect consumers from the energy crunch.

EDF will hold a €2.5bn rights issue, through which France’s government will pump €2.1bn into the company.

EDF announced the cash call after an estimated €8bn were wiped out by the French state’s move to cap energy bill hikes at 4% this year.

Under that plan, EDF was forced to sell electricity generated by its fleet of nuclear reactors to rival home suppliers at well below the current record high market prices, to protect customers in the cost of living crisis.

On top of that, EDF says it faces an €11bn hit to core profits from outages at several French nuclear power plants, due to maintance work.

France’s finance Mmnister Bruno Le Maire, told RTL radio station that the state’s participation in the EDF rights issue senta signal to investors.

“You can have confidence in EDF.”

EDF expects that higher global energy prices will add around €6bn to this year’s core profits.

Updated

GB retail sales rebound: what the experts say

Many economists are warning that UK retailers face a tough 2022, despite the bounceback in spending in January.

Adam Hoyes, assistant economist at Capital Economics, says the strong 1.9% jump in retail sales volumes last month masks some underlying weakness.

Food sales declined for the third consecutive month, by a chunky 2.3% m/m, although this may be partly due to people eating out more and ordering takeaways, which boosts non-retail spending.

Clothing sales fell 5.0% m/m (the second decline in a row), perhaps due to the less generous deals on offer in the January sales as confirmed by the consumer price data released earlier this week. This may suggest that the cost of living crisis is already forcing some households to cut back on spending.

Consumer spending will be squeezed as wages are eroded by inflation, as Sam Miley, senior economist at the CEBR thinktank, explains:

“Sales volumes returned to growth in January as the partial reversal of Omicron effects put upward pressure on consumer activity. Despite this monthly uptick, downside risks remain for the retail sector, notably the emerging cost of living crisis. Other data released this week showed that real earnings are now falling.

This trend is expected to continue over the coming months, leading to an erosion of consumer spending power and subsequent changes in the scale and structure of spending. Retail activity is likely to fall as a result.”

GB retail sales
GB retail sales Photograph: ONS/CEBR

Jacqui Baker, partner and head of retail at RSM UK, says the cost of living crisis means January’s uplift in sales might not last.

‘Consumer confidence is at its lowest level in 12 months, footfall is down, and mounting price inflation may curb future spending as fear of soaring energy costs, higher mortgage repayments and increased petrol prices eat into household budgets. This all lands ahead of a pinch point as retailers will face increased costs from 1 April with average hourly rates and national insurance both increasing, at a time when the remaining Covid support measures come to an end.

‘The next few months will undoubtably be tough for UK retailers, so it will be interesting to see if the Government will step in and announce new measures to ease the cost of living crisis for consumers and introduce urgent business rates reform in next month’s Spring Budget. This would allow confidence to return; give retailers the chance to recover; and prevent further distress across the sector after a slow start to the year post-Omicron.

European stock markets are rather mixed this morning, after Wall Street took a tumble last night.

In London, the FTSE 100 is up just 6 points. Utility companies are leading the risers, along with consumer goods maker Reckitt (+1.8%) , discount retailer B&M (+1.4%) and fashion group Burberry (+1.2%) also higher.

But NatWest is dragging the market down, now down 3%.

Ocado (-2%) and technology-focused investor Scottish Mortgage (-2.3%) are also down, after the US Nasdaq Composite fell 2.9% on worries about Ukraine conflict, and likely US interest rate rises.

Across Europe, the German DAX is down 0.1%, the Italian FTSE Mib is flat, while France’s CAC has gained 0.35%.

NatWest increases bonus pool by 44% as bank returns to profit

NatWest is giving its bankers bigger bonuses this year after the group, still majority-owned by taxpayers, bounced back to a £4bn profit in 2021 as the economy recovered from the coronavirus pandemic.

The lender said it had increased its bonus pool to £298m, a 44% increase on a year earlier.

Alison Rose, the chief executive of NatWest, said it was a “restrained bonus pool” and added that the bank was “very mindful of the challenges that our customers are facing with inflation and cost of living”.

She told BBC Radio 4’s Today programme:

“We need to make sure we are rewarding fairly.”

Rose’s total pay for 2021 was £3.6m, up from £2.6m a year earlier.

NatWest also benefitted from a booming mortgage market last year.

Net mortgage lending across the business jumped by £10.8bn in 2021, with NatWest reporting “strong gross new mortgage lending and improved retention”.

UK house prices jumped 10.8% during 2021, meaning borrowers had to take out larger loans to buy properties.

Customer deposits also rose during the year, up by £17.1bn or 10% across its retail banking.

NatWest says this was due to UK Government support schemes, and the Covid lockdowns which hit consumer spending and led to increased savings in the first half of last year.

NatWest’s shares have dropped 2.8% in early trading, despite its return to profit, the top faller on the FTSE 100.

The City may be disappointed that NatWest has lowered its cost reduction target (see earlier post), as it reacted to the surge in prices.

NatWest: What the experts say

Zoe Gillespie, investment manager at Brewin Dolphin, says NatWest appears to be in good health, following its return to profits.

“NatWest has beaten expectations again and looks set to continue on its positive trajectory. The net impairment release of nearly £1.3 billion, bumper profits, and strong capital reserves point to a bank in good health. The increased dividend and share buyback programme suggest NatWest’s management team are optimistic about the year ahead, while rising interest rates should only benefit its core business.

NatWest is now much more attractive as an investment prospect, notwithstanding the likelihood of the government winding down its substantial stake in the bank.”

Freetrade analyst Gemma Boothroyd says NatWest will benefit from the likely increases in interest rates this year:

For a bank like NatWest, an interest rate rise is warmly welcomed news. It means the spread increases between the rate it’s borrowing at and what it’s charging for interest on customers’ loans.

Although rates have risen, NatWest customers probably aren’t about to see more interest in their current accounts. They’re not going to benefit here, but NatWest is. That’s because the bank’s not worried about luring in more customers eager to make deposits.

NatWest doesn’t need to entice them with higher deposit rates - it’s already got enough cash on hand.

It’s all about raising the rates it charges on loans. NatWest’s Q4 net interest margin reached 2.38% - 3 basis points higher than the previous quarter.

That’s NatWest’s profit engine, and so long as it can keep widening that as rates rise, it’ll keep strutting through 2022.

So slowly but surely, NatWest’s getting back up on its feet. Its share price is finally returning to pre-pandemic levels, and investors will be welcoming today’s 7.5p dividend - well over double last August’s payout.

Richard Hunter, Head of Markets at interactive investor, says NatWest’s capital reserves look strong (allowing it to raise its dividend and launch the £750m share buyback programme).

“Another period of growth in the final quarter has sealed a successful year for NatWest, with the release of provisions for bad debts being a major driver.

Operating profit for the year of £4 billion compares to a loss of £481 million the previous year, and much of this significant swing was enabled by a net impairment release for the period of £1.3 billion.

The CET1 ratio, or capital cushion, stood at an extraordinary 18.2% at the end of the period, with a liquidity coverage ratio of 172% not only underlining the strength of the bank’s capital position, but also that there is something of an embarrassment of riches to be considered.

Updated

NatWest has cut its cost-cutting target for the next two years - due to the inflation squeeze hitting the UK.

The bank is lowering its cost reduction target to around 3% per annum for 2022 and 2023), reflecting “higher inflation and our ongoing investment in the business”.

NatWest back in profit amid economic recovery

Government-backed bank NatWest has returned to profit, as it benefitted from the economic recovery last year.

NatWest has kicked off the bank reporting season by posting an operating pre-tax profit of £4bn in 2021, recovering from the £481m loss in 2020.

Profits were boosted by impairment releases of £1.3bn -- money set aside to cover potential losses due to the pandemic, which NatWest now doesn’t expect to incur.

Shareholders will benefit, with NatWest proposing a final dividend for 2021 of 7.5p, more than double last year’s 3p.

It has also announced a share buyback of £750m - another way of returning cash to shareholders.

This means NatWest will distribute more than £3.8bn of capital to shareholders for 2021, including £1.7bn to the taxpayer (who own a majority stake, dating back to the bailout of Royal Bank of Scotland in 2008).

Here’s the details:

  • £1.2bn dividends - £846m final (7.5p/share), £347m interim (3p/share).
  • £1.5bn on market buy-backs - £750m executed + additional £750m announced today.
  • £1.1bn directed buy back in March ‘21.
  • Total of ~£1.7bn back to UK government in dividends and buybacks for ‘21.

CEO Alison Rose says:

We are acutely aware of the challenges that many people, families and businesses continue to face up and down the country and are working alongside our customers to provide the support they need - whether that is managing their money better, saving for a house or retirement or starting or growing a new business - as well as playing a leading role in the transition to net zero.

Updated

Darren Morgan, ONS Director of Economic Statistics, says British retailers saw the biggest increase in sales since last spring:

There was also a jump in spending on fuel last month, as more people returned to the office after the move to home working.

Automotive fuel sales volumes rose by 4.1% in January 2022, following a fall of 5.0% in December.

But, sales volumes in January 2022 were still 3.3% below their February 2020 levels

Introduction: UK retail sales rebound in January

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Retail sales have bounced back as shoppers returned to high streets after the Omicron variant hit the UK economy.... despite the squeeze from inflation.

Retail sales volumes across Great Britain rose by 1.9% in January, faster than expected, and the biggest monthly increase since the lockdown was lifted last spring.

That recovers about half of the 4.0% drop in December when the surge in Covid-19 cases and pandemic restrictions hit spending, and lifts retail spending to 3.6% above its pre-pandemic levels.

The recovery was driven by an increase in spending at non-food stores such as household goods and garden centres.

The ONS explains:

Household goods stores sales volumes rose by 7.5% in January 2022 because of strong growth in furniture and lighting stores (16.6%) and electrical goods stores (16.0%). Sales volumes were 3.8% above their February 2020 levels.

Department stores reported a monthly increase of 7.1% in sales volumes but remained 8.0% below their February 2020 levels.

But, clothing stores reported a fall of 5.0% over the month -- possibly because the January sales were less generous (which also pushed up inflation to a 30-year high).

On an annual basis, people bought 9.1% more items than a year ago, when non-essential shops were closed in the 2021 lockdown.

However, spending at food stores such as supermarkets fell below pre-coronavirus levels for the first time. Retail volumes at food stores were 0.8% below where they were in February 2020, having surged once the first lockdown began.

In another sign that the economy was returning to more normal, online shopping’s share of spending fell to 25.3% in January 2022, its lowest proportion since March 2020.

The retail sales report also shows the impact of inflation over the last year, with the amount spent at retailers up 16.5% -- although volumes were only 9.1% higher....

UK retail sales
UK retail sales Photograph: ONS

Elsewhere, European stock markets are on track to open slightly higher, after US secretary of state Antony Blinken agreed to a meeting with Russian foreign minister, Sergei Lavrov, next week.

Wall Street and European stocks fell on Thursday as the US said Russia was on the brink of invading Ukraine within several days.

The agenda

  • 7am GMT: UK retail sales to January
  • 7.45am GNT:France’s inflation report for January
  • 10am GMT: Eurozone construction PMI for December
  • 3pm GMT: Eurozone consumer confidence report for February
  • 3pm GMT: US existing home sales for January

Updated

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