Britain’s retail sales fell sharply in January, dropping 0.3 percent from the previous month, according to official figures released today by the Office for National Statistics (ONS).
Both online and in store sales suffered.
The figures were lower than had been forecast. A 0.9 percent rise from December was predicted for the first month of 2017.
“The theme for most forecasters this year is that consumer spending is going to suffer as higher prices erode real incomes. But I don’t think anyone would have expected the pace of spending to have suffered so much so soon,” said Alan Clarke, an economist at Scotiabank.
Sterling sank to a 10-day low, down almost 0.5 percent against the euro in response to the poor retail performance.
Why the struggle to sell?
Last year’s vote for the UK to quit the European Union continues to push up inflation and is partly to blame for the slump in retail sales.
Rising food and fuel prices also contributed to January’s sharp fall.
The UK’s average petrol price rose to 120.11p a litre this week, up 0.63p from mid-January, according to the AA, the British motoring association.
Diesel is now 122.32p a litre, 0.34p more than this time last month.
“In the three months to January 2017, retail sales saw the first signs of a fall in the underlying trend since December 2013,” said Kate Davies, a senior statistician from the ONS.
“We have seen falls in month-on-month seasonally adjusted retail sales, both in conventional stores and online, and the evidence suggests that increased prices in fuel and food are significant factors in this slowdown.”
— Ian Fraser (@Ian_Fraser) 17 February 2017
Average store prices, including fuel, were 1.9 percent higher in January than a year earlier.
At stores that sell predominantly food, sales volumes were 0.2 percent lower in January 2017 than in January 2016.
“As we saw in the early 2010s, it is hard for retailers and other consumer businesses to achieve high volume growth when inflation is high and wages are not rising to compensate. This is the pattern we should expect to see repeated in 2017 and 2018,” said Andrew Sentance, a senior economic adviser at PwC in a statement issued to Verdict.