United Kingdom retail sales unexpectedly fall in January

Cheryl Sanders
February 17, 2017

The quantity bought by consumers grew by just 1.5 per cent in the last 12 months, while January saw a 0.3 per cent fall compared to December, according to Office for National Statistics (ONS) estimates.

Evidence suggested that higher food and fuel prices could be the culprit.

"In the three months to January 2017, retail sales saw the first signs of a fall in the underlying trend since December 2013", ONS statistician Kate Davies said in a statement.

GETTYHouseholds spent £11.40 on drink and drug in 2015/16 down 42 per cent from 2001/2002

Inflation hit a 31-month high of 1.8 percent in January and is expected to rise further on higher import prices.

Online sales, which account for around 14.6% of all retail spending, lifted by 10.1% annually in January, the statistics agency said, but sunk 7.2% on the month.

Excluding automotive fuel, the retail sales volume slid 0.2 percent, confounding expectations for an increase of 0.7 percent. Sterling was also 0.3 per cent lower versus the euro at 1.166.

The surprise fall in the official measure of retail sales volumes has brought the recent run of resilient economic news to an abrupt end and suggests that the hit to consumer spending growth from higher inflation is starting to materialize, Ruth Gregory, a United Kingdom economist at Capital Economics, said.

'The economy's persistent resilience since last June's Brexit vote has been largely built on consumers keeping on spending, ' he said. Although a knock to consumer spending was expected, it's going to be hard to predict how significantly it will weaken as changes begin to take place in a post-European Union membership landscape.

'This was reinforced by a dip in earnings growth in December'.

Inflation reached a two-and-a-half-year high in January at 1.8% after more expensive food and fuel bumped up the overall cost of living.

Shoppers are starting to rein in their spending as their budgets are being squeezed by rising inflation, sparking fears that the economy could be in for a bumpy ride this year, new data suggests. Food prices continued to fall but a significantly lower pace, the ONS said.

Alan Clarke, head of European fixed income strategy at Scotiabank, said it was the second consecutive month that retail sales were weaker than expected.

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