UK Retail Sales Surge: January 2026 Shocks with +1.8% Jump, Boosting GBP Outlook

January 2026 shocks with +1.8% rise, which improves the forecast for GBP.

According to the most recent Office for National Statistics (ONS) data, January 2026 saw UK retail sales volumes rise by 1.8% month over month, far exceeding the consensus prediction of +0.2% and building on December's revised +0.4% increase. Sales rose 4.5% year-over–year, topping predictions of +2.8% and coming from a downwardly adjusted +1.9% in the prior period. Robust post-holiday expenditure, especially in non-store and internet channels, propelled the powerful performance including significant increases in art, antiques, and online jewelry in addition to contributions from fuel and non-food categories despite weaker grocery outcomes.

With non-store sales and online sales spearheading the charge in line with wider studies like the British Retail Consortium's (BRC) indication of a 2.7% y/y growth in total retail sales, this upbeat print celebrates consumer resilience in the face of easing inflation. Although supermarkets and fuel offered somewhat help, the rise in discretionary and digital-driven purchases balanced out the poorer non-food categories, pointing to a strong recovery following a subdued holiday season and showing that retail volumes were stabilizing in better economic circumstances.

The data gave the British Pound an instant surge, temporarily lowering hopes for strong Bank of England rate cuts from the present 3.75% holding level, albeit the MPC's most recent tight vote implied possible easing in March should inflation keep moderating. The numbers generally support indicators of consumer confidence returning, but more general spending growth in 2026 is projected to stay constrained as families negotiate continuing cost constraints.