UK retail sales unexpectedly falls for third month in January

Drop suggests people are being affected by soaring prices from accelerating inflation

The volume of goods sold in stores and online declined 0.3 per cent following a 2.1 per cent plunge in December, the Office for National Statistics said. Photograph: Bryan O’Brien

The volume of goods sold in stores and online declined 0.3 per cent following a 2.1 per cent plunge in December, the Office for National Statistics said. Photograph: Bryan O’Brien

 

UK retail sales unexpectedly fell for a third month in January, suggesting consumers are starting to feel the squeeze from accelerating inflation.

The volume of goods sold in stores and online declined 0.3 per cent following a 2.1 per cent plunge in December, the Office for National Statistics said on Friday. The fall confounded market expectations for a 1 per cent increase. In the three months through January, sales dropped 0.4 per cent, the worst quarterly performance since 2013.

The figures add to evidence that the long-awaited cooling in household spending is materialising as Britons find their purchasing power eroded by soaring prices. That threatens to hurt an economy that relies heavily on consumers for growth.

The data show “the first signs of a fall in the underlying trend since December 2013,” said ONS statistician Kate Davies. “The evidence suggests that increased prices in fuel and food are significant factors in this slowdown.”

Decline in food sales

Inflation hit 1.8 per cent last month and is forecast to keep climbing through 2017 as the sharp drop in the pound since the Brexit vote boosts import costs. The price of retail goods sold in January, as measured by the deflator, increased on an annual basis by 1.9 per cent, the biggest rise since mid-2013.

In January, there were declines in sales of food, household goods and products bought online. That left sales just 1.5 per cent higher than a year earlier, the weakest annual pace in more than three years. Sales excluding auto fuel fell 0.2 per cent on the month.

The 2.1 per cent drop in total sales in December was revised from a previous estimate of 1.9 per cent and represented the biggest drop since May 2011.

While inflation is predicted by some economists to top 3 per cent this year, wage growth remains anaemic at just over 2.5 per cent, putting real incomes on course for their worst year since 2013.

– Bloomberg