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UK Retail Sales Log Unexpected Fall In January

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UK retail sales declined unexpectedly at the start of the year as consumers curbed their spending in response to rising inflation.

Retail sales including automotive fuel dropped 0.3 percent month-on-month in January, following a 2.1 percent fall in December, data from the Office for National Statistics showed Friday.

Sales were expected to grow 1 percent in January after falling for two consecutive months.

Excluding automotive fuel, the retail sales volume slid 0.2 percent, confounding expectations for an increase of 0.7 percent. Nonetheless, the pace of decline was slower than December's 2.2 percent decrease.

During three months to January, sales dropped 0.4 percent sequentially.

ONS Senior Statistician Kate Davies, said retail sales saw the first signs of a fall in the underlying trend since December 2013. She said the evidence suggests that increased prices in fuel and food are significant factors in this slowdown.

Inflation hit a 31-month high of 1.8 percent in January and is expected to rise further on higher import prices. Average prices of retail goods sold in January grew 1.9 percent, the biggest annual increase since July 2013.

The surprise fall in the official measure of retail sales volumes has brought the recent run of resilient economic news to an abrupt end and suggests that the hit to consumer spending growth from higher inflation is starting to materialize, Ruth Gregory, a UK economist at Capital Economics, said.

If consumers really are now beginning to moderate their spending, the long anticipated slowdown in the economy may be about to materialize, IHS Global Insight Economist Howard Archer, said.

The Bank of England forecast economic growth to slow slightly to 0.5 percent in the first quarter of 2017.

Food store sales slid 0.5 percent from December, while non-food sales climbed 1 percent in January.

Year-on-year, retail sales growth eased sharply to 1.5 percent from 4.1 percent a month ago. This was the weakest expansion since November 2013. The annual growth was expected to slow moderately to 3.4 percent.

Excluding auto fuel, retail sales growth came in at 2.6 percent versus 4.7 percent in December and the expected rate of 3.9 percent.

by RTT Staff Writer

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