The U.K. budget surplus hit a seven-year high in January on rising personal income tax, signaling that the government is set to achieve the target before the general election in May.
Meanwhile, retail sales declined slightly more-than-expected in January, marking the first fall in four months on weak food and clothing sales.
Net borrowing excluding public sector banks totaled -GBP 8.8 billion in January, an increase of 34.9 percent from last year, the Office for National Statistics said Friday. Nonetheless, the surplus was slightly below the GBP 9 billion predicted by economists.
Income tax receipts grew 6.1 percent in January and corporation tax gained 12.1 percent. Meanwhile, stamp duties on shares, land and property fell 11.4 percent.
The self-assessed income tax receipts increased in January this year. The ONS cautioned that the proportion of self-assessed income tax recorded in January and February can vary year-on-year and it is therefore advisable to consider data for the two months together.
The year-to-date budget deficit for the financial year 2014/15 declined by 7.5 percent to GBP 74 billion. Chancellor George Osborne earlier in December estimated the budget shortfall to reach GBP 91.3 billion in the fiscal year ending March 2015.
To achieve his target of GBP 91.3 billion for 2014/15, the shortfall will have to be limited to GBP 17.3 billion in February and March, which would be the same as the actual shortfall of GBP 17.3 billion in February and March 2014, IHS Global Insight's Chief UK Economist Howard Archer said.
Another report from the ONS showed that retail sales fell for the first time in four months in January. Sales including automotive fuel were down 0.3 percent from the previous month.
Economists had forecast sales to drop 0.2 percent after a 0.2 percent rise in December. The monthly fall was driven by food stores, textile, clothing and footwear and other store sales.
Sales excluding auto fuel declined 0.7 percent, worse than an expected 0.3 percent drop and a 0.1 percent fall seen in December.
On a yearly basis, overall retail sales growth accelerated to 5.4 percent from 4 percent in December. Sales were expected to grow 5.9 percent.
It was the 22nd consecutive month of year-on-year growth and also the longest period of sustained year-on-year growth since May 2008, the ONS said.
Excluding auto fuel, retail sales volume advanced 4.8 percent, faster than December's 3.8 percent increase, but weaker than a 5.9 percent rise forecast by economists.
Average store prices fell 3.1 percent on a yearly basis in January, the biggest annual fall since consistent records began in 1997.
With households not yet having felt the full benefits of lower oil prices, earnings growth accelerating and firms' hiring intentions still strong, retailers should be able to look forward to a strong 2015, Samuel Tombs, a senior UK economist at Capital Economics said.
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