The monthly increase was larger than the average 1% gain forecast in a Reuters poll, although December’s drop in sales was slightly bigger than first estimated.
“The solid rise in retail sales volumes in January adds to the signs that the Omicron-induced hit to activity was smaller and shorter-lived than previously thought. Even so, the cost of living crisis means the outlook for retailers is anything but bright,” said Adam Hoyes, economist at Capital Economics.
UK retailers face rapidly surging consumer price inflation, which hit its highest in nearly 30 years in January at 5.5%, and is forecast by the Bank of England to peak above 7% in April.
A separate measure of inflation used to calculate January’s retail sales data rose to 6.7%, the highest on record.
Fast-rising prices for energy and food leave consumers with less spare cash to spend on non-essentials, and 2022 looks set to bring the biggest squeeze on households disposable income in 30 years.
January sales volumes were 9.1% higher than a year earlier, when non-essential shops were shut due to lockdown restrictions, and 3.6% above pre-pandemic levels.
Britain’s retail sector as a whole was relatively resilient through the Covid-19 pandemic, with sales as a whole already back above January 2020 levels in July 2020, thanks to a big shift to online shopping.
Food sales have fallen below pre-pandemic levels for the first time.
“More people returned to eating out and there was also anecdotal evidence suggesting higher demand for takeaways and meal-subscription kits,” ONS statistician Darren Morgan said.