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U.K. Retail Sales Drop Unexpectedly; Dents Recovery Hopes


Denting recovery hopes, U.K. retail sales fell unexpectedly in January as heavy snow fall battered food turnover, official data from the Office for National Statistics showed Friday.

Confounding expectations for a 0.5 percent rise, retail sales including auto fuel dropped 0.6 percent in January from the previous month, when sales fell 0.3 percent.

Likewise, retail sales excluding auto fuel dropped 0.5 percent month-on-month, after easing 0.4 percent in December. The decline was in contrast to a 0.5 percent increase forecast by economists.

Due to snow fall in the latter half of January, food store sales plunged 1.6 percent. On the other hand, non-food sales advanced 0.6 percent. Sales of household goods were down 0.3 percent, while clothing and footwear sales gained 0.4 percent.

Even allowing for a substantial hit to retail sales from the snow, the further fall in January fuels concern that consumers may be becoming more careful in their spending as consumer price inflation moves back up, says IHS Global Insight economist Howard Archer.

This year 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, Samuel Tombs at Capital Economics noted.

Including auto fuel, retail sales decreased 0.6 percent annually in January, reversing December's 0.1 percent rise and against a 0.9 percent expected increase. Meanwhile, growth in sales excluding auto fuel slowed to 0.2 percent from 0.8 percent in December.

However, the findings of a recent survey by British Retail Consortium for January were encouraging despite the snow. According to BRC, retail sales value increased 1.9 percent from the previous year.

The volume of sales in the food sector decreased 2.6 percent, to the lowest since April 2004, ONS said. Nonetheless, the amount spent in food stores gained 0.9 percent. Sales volume in non-food stores grew 1.7 percent and the amount spent climbed 0.8 percent.

by RTTNews Staff Writer

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