UK retail sales volumes failed last month to show any meaningful rebound following a plunge in December, official figures reveal, fuelling worries about the consumer squeeze and economic growth.
Figures published yesterday by the Office for National Statistics show retail sales volumes rose only 0.1 per cent on a seasonally adjusted basis in January, having tumbled by 1.4 per cent in December. Economists had forecast a 0.5 per cent increase. Food sales volumes declined.
Comparing the November to January period with the preceding three months, retail sales volumes were up by only 0.1 per cent.
The weak retail sales figures come hard on the heels of disappointing surveys from the Chartered Institute of Procurement & Supply of manufacturing, construction and services sector activity in January, which signalled a quarterly growth rate of less than 0.3 per cent.
Howard Archer, chief economic adviser to the EY ITEM Club think-tank, said of the marginal rise in retail sales volumes in January: “This points to cautious, squeezed consumers containing their spending at the start of 2018, after weak retail sales over the fourth quarter of 2017.”
He added: “Following on from a weaker set of purchasing managers’ surveys for services, manufacturing and construction, muted retail sales in January fuel suspicion that the economy may have lost some momentum at the start of the first quarter.”
Ben Brettell, senior economist at stockbroker Hargreaves Lansdown, said: “Weak consumer spending remains a significant headwind for the UK economy.”
“Sales were up 0.1 per cent in January...This suggests consumers were somewhat reluctant to splurge in the January sales. The news is a further blow to the UK’s domestic economic prospects following December’s 1.4 per cent decline.”
He added: “We’ve been waiting for the pay squeeze to filter through to the high street but for much of last year retail sales held up better than many expected. The big question now is whether this is the start of a worrying trend for the economy, or whether falling inflation and rising wages will come to the rescue.”
Annual UK consumer prices index inflation hit 3.1 per cent in November, its highest since March 2012, and came in at three per cent in both December and last month. It was only 0.3 per cent in May 2016, just ahead of the Brexit vote, before being fuelled by sterling weakness following the referendum result.
This surge in inflation has seen a renewed fall in real wages.
However, a survey by Bank of England agents around the UK published this week showed companies expect average pay settlements to increase to 3.1 per cent in 2018, from 2.6 per cent last year.
This fuelled talk of a further rise in benchmark UK interest rates from the Bank in May. The Bank raised UK base rates by a quarter-point from a record low of 0.25 per cent in November.
The ONS figures show food sales volumes dropped by 0.4 per cent month-on-month in January. Non-food sales volumes rose by 0.7 per cent last month.
Figures published earlier this week by the Scottish Retail Consortium showed the value of sales north of the Border last month was down 0.1 per cent on a weak January 2017 comparative.
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