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UK retail sales fall unexpectedly

News, 20 February 2017
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LONDON: UK retail sales fell by 0.3% in January compared with the previous month, which was well below market expectations of sales growth of 0.9%, according to official figures released on Friday.

The Office for National Statistics (ONS) also reported that retail sales grew by 1.5% compared with the same period a year ago, but said this was the lowest growth since November 2013.

And in another worrying sign for brands and retailers in the UK, the ONS said the underlying three-month trend decreased by 0.4%, the first fall since December 2013. Retail prices increased 1.9% in January compared with a year ago, the most since July 2013, while fuel prices rose sharply year-on-year by 16.1%.

Online sales were also hit by British shoppers cutting back on their spending. Although online sales, excluding fuel, increased by 10.1% year-on-year, they saw a 7.2% decline month-on-month in January.

"In the three months to January, retail sales saw the first signs of a fall in the underlying trend since December 2013," said Kate Davies, Senior Statistician at 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."

Economists have often been surprised by the resilience of the UK economy since the country decided in a referendum in June to leave the European Union, but now some are questioning whether the impact of Brexit is beginning to bite.

"The economy's persistent resilience since last June's Brexit vote has been largely built on consumers keeping on spending," said Howard Archer, Chief UK Economist at HIS Global Insight.

"If consumers really are now beginning to moderate their spending, the long-anticipated slowdown in the economy may be about to materialise," he told Retail Gazette.

"Consumer fundamentals remained largely healthy until recently, but purchasing power is now being meaningfully squeezed by markedly rising inflation," he added.

Ruth Gregory from Capital Economics agreed, telling the BBC: "January's surprise fall in the official measure of retail sales volumes has brought the recent run of resilient economic news to an abrupt end. And the rest of the year is shaping up to be tough on the high street, given the expected squeeze on consumers' real pay growth."

Data sourced from ONS, Retail Gazette, BBC; additional content by Warc staff

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