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UK Retail Sales Rebound Strongly At Start Of Year

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UK retail sales rebounded strongly at the start of the year, rising at a faster-than-expected pace, led by robust growth in clothing and footwear sales that were supported by price cuts, offering some respite amid the chaotic developments as Brexit looms.

Retail sales including auto fuel rose 1 percent from December, when they decreased 0.7 percent, preliminary data from the Office for National Statistics showed on Friday. Economists had expected a 0.2 percent gain.

On a year-on-year basis, retail sales including auto fuel rose 4.2 percent in January, which was the biggest increase since December 2016.

Economists had expected sales growth to rise modestly to 3.4 percent from December's 3.1 percent increase.

Clothing and footwear sales grew 5.5 percent year-on-year amid a price fall of 0.9 percent. Food store sales returned to strong growth, rising 3.2 percent.

Meanwhile, online sales as a total of all retailing shrunk to 18.8 percent in January from 19.8 percent in December.

Excluding auto fuel, retail sales climbed 1.2 percent monthly reversing a 1 percent slump in December. Economists had forecast a modest 0.2 percent gain.

Compared to a year ago, retail sales excluding auto fuel grew 4.1 percent in January after a 2.9 percent increase in December. That was the fastest increase in six months. Economists had forecast 3.2 percent gain.

"Clothing stores saw strong sales, luring consumers with price reductions, with food sales also growing after a slight dip over Christmas," ONS Head of Retail Sales Rhian Murphy said.

With the Brexit uncertainty dampening economic activity, consumer spending in recent months were likely supported by wage growth, which is at a decade-high, and slowing inflation.

"Brexit uncertainty is likely to keep a lid on spending over the next few months," ING economist James Smith said.

"Shoppers may opt against bigger ticket purchases in the short-term, instead choosing to maintain savings levels," the economist added

Official data released earlier this week showed that Britain's economic growth slowed sharply in the fourth quarter of 2018, and the full year growth was the slowest in six years, as activity was dampened by Brexit worries and global trade tensions.

Gross domestic product grew 0.2 percent from the third quarter, when the economy expanded 0.6 percent. Economic growth in the full year 2018 was 1.4 percent, which was the slowest since 2012, when the economy expanded at the same pace.

The UK is set to leave the European Union on March 29, but Prime Minister Theresa May is yet to figure out how this is going to happen - whether the country would leave the bloc with some deal on trade and other crucial matters or quit without any arrangements.

The Bank of England warned earlier that a no-deal Brexit would cause a severe recession in the UK, the kind not even seen during the global financial crisis a decade ago.

The central bank lowered the growth forecast for this year to 1.2 percent, the slowest pace in a decade, from 1.7 percent predicted in November. That was the biggest cut in the projection since the 2016 referendum.

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