Retail sales rebounded in January as shoppers returned to the high street after the disruption caused by the Omicron coronavirus variant eased. Official figures showed that sales increased by 1.9% in Great Britain last month, with much of the increase credited to a jump in demand for furniture and DIY tools from households looking to refresh their homes. Petrol and diesel sales also rebounded in January after workers began to return to the office and consumers made more trips to out-of-town shopping centres. Supermarkets, which have experienced booming food sales during the pandemic, suffered a drop in sales to below their pre-pandemic level for the first time, as more people returned to eating out. Online sales also contracted as people ventured out more, triggering a drop in the proportion of purchases on the web to its lowest level since March 2020. The sales uplift was stronger than City economists had forecast, and compared with a 4% fall in the run-up to Christmas, after the Office for National Statistics downgraded its previous estimate of a 3.7% drop in sales. Analysts said, however, that sales were likely to be hit over the coming months and send more shops closer to the edge of bankruptcy, as the cost of living crisis intensifies and the squeeze on wage packets weighs on consumer confidence. Inflation increased to 5.5% in January, driven by a rise in the cost of energy and clothing and footwear. The energy regulator Ofgem has said the cap on household energy will increase in April, sending average bills up by almost £700 a year. Anti-poverty groups and opposition parties have complained that a government rescue package will do little to combat rocketing household bills, higher taxes and more expensive mortgage payments expected over the next year. Rishi Sunak has offered a £150 grant, which will be knocked off council tax bills in England, and a £200 loan in October to offset the rising cost of gas and electricity. Consumer confidence surveys have shown Britons becoming increasingly reluctant to spend their earnings on non-essential items while inflation is increasing. Signals from the Bank of England that it plans to increase the base interest rate further from 0.5% to above 1% has also weighed on consumer sentiment. Shops have reported consumers bargain hunting in response to rising prices, giving a boost to discounters on the high street. Nevertheless, the ONS reported a sharp increase in the value of goods bought in January. Over the three months to the end of January the amount sold increased by 3.1% while sales values rose by 9.9%. Paul Martin, the UK head of retail at KPMG, said: “The retail sector started the year in relatively good health and not facing further Covid restrictions on the ability to trade.” He added, though: “Retailers will be acutely aware that the cost of living squeeze could see consumers scrutinising their spending more over the coming weeks and months, impacting trade. “This picture will be compounded if those who managed to save during the pandemic decide the time isn’t right to spend what they’ve accrued.” Petrol and diesel sales also rebounded in January after workers began to return to the office and consumers made more trips to out-of-town shopping centres. A separate survey of consumer spending found that the new year sparked a surge in spending on holiday bookings. Nationwide building society said that analysis of £200m worth of credit and debit card transactions showed a 379% increase in spending on all types of holidays in January from a year earlier. This included a 408% rise in foreign travel and a 899% boost to spending on cruises. There was also a 26% month-on-month increase in spending on utilities and bills in January compared with December. Spending on utilities and bills was also up by 9% compared with January 2021, Nationwide’s analysis found. Samuel Tombs, the chief UK economist at the consultancy Pantheon Macroeconomics, said that while official figures showed sales volumes above pre-pandemic levels, they were still 0.5% below their average level in the final quarter of 2021, “and the near-term outlook remains overcast”. He said: “Households’ real disposable income looks set to fall by nearly 2% this year, the most since 1977. And while high-income households have amassed considerable savings, we judge they are more likely to splurge them on big-ticket items, such as cars or foreign holidays, than on retail store purchases. “In addition, the below-average level of consumers’ confidence suggests that households will be reluctant to borrow more to smooth out the real income shock, unlike in 2017, when sentiment was higher.”