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The Globe and Mail

U.K. retail sales fall unexpectedly in January

Shoppers pass an HMV shop in central London, January 15, 2013.


British retail sales unexpectedly fell in January as snowy weather hurt food stores and other retailers, reviving worries that the economy may be slipping into a third recession in four years.

Sales volumes including automotive fuel slipped 0.6 per cent in both monthly and annual terms, the Office for National Statistics said on Friday, compared to economists' expectations for solid growth in both numbers.

"This probably brings the question of triple-dip back on the table again," said Rob Wood, economist at Berenberg Bank.

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"If this is the sort of disruption we see from snow and it's reflected in output in the rest of the economy, then it could be bad news for Q1," he added.

The pound hit a half-year low against the dollar and British government bonds extended gains after the data was released.

Economists taking part in a Reuters poll had forecast a 0.4 per cent rise on the month in January. The ONS also revised December's numbers down.

Besides the temporary hit from poor weather, Britons' spending power has been eroded by sticky inflation in recent years.

The Bank of England warned on Wednesday that high inflation would persist much longer than forecast only three months ago, pointing to a further fall in Britons' real wages, already at their lowest since 2003.

"When we look at the overall numbers for Christmas – we tend to look at between November and January – they've been exceptionally weak," said George Buckley, economist at Deutsche Bank. "Inflation has picked up and that might mean that volumes of sales have been weaker."

The ONS said the main reason behind falling sales was bad weather during the month, which led to shutdowns of some smaller grocers and drove the biggest monthly fall in overall food sales since May 2011.

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Food accounted for more than 40 per cent of the total retail sales in January, as measured by the ONS.

The quantity of food sold fell by 2.6 per cent compared with January last year, touching its lowest volume since April 2004.

The share of online food sales jumped by nearly a third, probably another reflection of the bad weather that kept shoppers at home. The increase in online shopping helped big retailers, the ONS said.

The ONS said retail sales excluding fuel fell 0.5 per cent on the month but were 0.2 per cent higher than in January 2012 – much weaker than economists' forecasts for rises of 0.4 per cent on the month and 1.4 per cent on the year.

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