UK retail sales show biggest drop in almost two years

UK retail sales fell more than economists forecast in January with the biggest drop in almost two years, led by lower demand at food and clothing stores.

Sales including fuel plunged 1.5 per cent from December, when they surged 2.5 per cent, the Office for National Statistics said today in London. The decline was the biggest since April 2012 and exceeded the 1 per cent median forecast of 19 economists in a Bloomberg News survey.

The slide, in a critical month for retailers as they clear winter stocks with seasonal discounts, highlights the risks to Britain’s recovery.

The Bank of England raised its economic projections this month and forecast that household-spending growth will accelerate to more than 3 per cent this year from 2.25 per cent in 2013.

“This has to be viewed in the context of the surge in sales in December,” said James Knightley, an economist at ING Bank in London. “With consumer confidence on a strong upward path, employment rising and wage growth starting to show some hints of life, we look for the household sector to contribute strongly to gross domestic product growth this year.”

Today’s report showed that food sales fell 3.4 per cent in December from January, while sales of clothing, footwear and textiles dropped 3.5 per cent, the most since April 2012.

Household goods sales increased 5.3 per cent, boosted by furniture and electrical goods. There was also an increase in sales of cosmetics, which is often seen in months when people buy fewer clothes, the ONS said.

From a year earlier, retail sales were up 4.3 per cent, and the statistics office said the data still points to growth in the industry. In the three months through January, sales rose 1.1 per cent compared with the previous three months. (Bloomberg)