United Kingdom retail sales significantly undershoot forecasts as inflation and Brexit bite

Andrew Cummings
February 17, 2018

"The average Brit has spent the past few years living the mantra "when the going gets tough, the tough go shopping" but January's retail sales number shows that United Kingdom consumer spending is not as hardy as it once was", said Jeremy Cook, chief economist at foreign exchange services group WorldFirst.

While looking at the retail sales in the on a quarterly basis, the retail sales rose also 0.1 percent during the last three months contributing nothing to the GDP growth.

Figures released this morning by the Office for National Statistics as sales volumes rose by 1.6 per cent on the year, compared to 2.4 per cent a year ago.

The latest figures showed declines across all segments except non-food stores.

The year-on-year growth rate for quantity bought in food stores showed a decline for the sixth consecutive month with a drop of 0.9%, due largely to a continued rise in food store prices.

The statistics agency pinned the blame on widespread price rises, with sliding food sales being countered by double-digit growth of games, toys and sports equipment.

"Growth in the quantity of sporting equipment, games and toys being bought was offset by falling food sales when compared with the same month a year earlier", added Rhian Murphy, senior statistician at the ONS.

Retail sales data in the United Kingdom has disappointed experts' forecast for several months now, with December delivering declining sales growth of 1.5%.

However, this was an increase on the January 2017 figure of 15.8%. This means that the real, inflation-adjusted wages are negative with the prices rising faster than wages weighing on consumers willingness to shop.

However, Brettell believes "there could be some light at the end of the tunnel" if the Bank of England's assertions that wage growth is on the rise and inflation has peaked are correct.

Although volumes were 1.6% higher than a year earlier and the amount consumers spent was up 4.4%, the ONS pointed out this year-on-year growth was still slower relative to earlier months.

"Our data showed that the average spend in January was higher than in December, particularly in the first week of the month which saw purchases up 12 per cent compared to the average day past year".

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