Unexpected decline in UK retail sales adds to triple-dip recession fears

Fears Britain may be heading towards an unprecedented triple-dip recession flared again as the government reported a surprise drop in high street spending last month.

Despite surveys suggesting shoppers had been out in force in January, the Office for National Statistics said the volume of retail sales fell by 0.6% in January.

This followed a revised 0.3% drop in December and reflected the tough trading conditions for shops and stores in the two key trading months of the year. Last month saw a number of high-profile casualties such as HMV and Blockbuster.

The ONS said retail sales in January were also 0.6% lower than they had been a year earlier – the first time the annual rate of spending has turned negative since the summer of 2011.

Although the second half of the month saw heavy snow falls, analysts had been optimistic that spending in January would bounce back from a disappointing December and had been pencilling in a 0.5% increase.

The ONS said the cold weather had dampened spending, particularly among smaller food stores. A 1.6% fall in sales of groceries in January was a big factor in last month's drop in activity, but household goods stores also suffered.

Quarterly data – a better guide to the underlying trend – highlighted the pressure on the sector resulting from the squeeze on consumer spending power.

Retail sales volumes in the three months to January were 0.8% lower than in the three months ending October, and were down by 0.6% excluding fuel.

James Knightley, economist at ING, said: "This adds to the negative news flow with worries over the UK's EU referendum and the Scottish independence vote along with a potential rating downgrade all helping to keep downward pressure on sterling."

Samuel Tombs, an analyst at Capital Economics, said: "January's surprise fall in the official measure of UK retail sales volumes brings the recent run of better economic news to an abrupt end."

Tombs said he expected retail sales to bounce back in February after the poor weather: "Nonetheless, 2013 still looks set to be another tough year for retailers, given the likelihood of a further significant squeeze on real pay and a weaker jobs market."

Source : Larry Elliott – The Guardian
www.guardian.co.uk/business/2013/feb/15/uk-retail-sales-drop-triple-dip-recession