Pound Extends Decline as UK Retail Sales Notch Surprise January Slump
Feb 17 2017 by Desiree Burns
Retail sales fell unexpectedly in January in a sign the consumer strength that has powered the economy in the wake of last June's Brexit vote might be waning in the face of higher inflation.
The lacklustre retail report from the ONS follows an equally disappointing December, when volumes fell 1.9pc month-on-month.
Retail sales including automotive fuel dropped 0.3 percent month-on-month in January, following a 2.1 percent fall in December, data from the Office for National Statistics showed Friday.
The pound deepened its losses against the greenback after retail sales missed expectations, dropping 0.5 per cent to 1.241 USA dollars. She said the evidence suggests that increased prices in fuel and food are significant factors in this slowdown. Meanwhile, sales excluding auto fuel declined 0.2% on the month and 2.6% on the year.
Economists had predicted growth of 1%.
The squeeze was driven in part by a 16.1% year-on-year leap at petrol stations, which helped bump up average store prices, including fuel, by 1.9% last month.
Food prices across the United Kingdom also started to rise in January, increasing 0.5 per cent month-on-month, the biggest increase in four years.
At food stores, prices increased by 0.5% in January compared with the month before, marking the biggest month-on-month rise since April 2013.
Howard Archer, chief United Kingdom and European economist at IHS Global Insight, said the data indicated that the slowdown in the economy, which was widely predicted to occur following the Brexit vote, was now under way.
Earlier this week the Bank of England said the UK's inflation rate hit its highest level in two and a half years in January at 1.8%, as the impact of a weaker pound and rising energy prices were increasingly passed on to consumers. The annual growth was expected to slow moderately to 3.4%.
On the year, retail sales rose 1.5%, undershooting expectations for a 3.4% jump.