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U.K. Jan Retail Sales Fall Most Since April 2012; Budget Surplus Declines


British retail sales declined at the sharpest pace since April 2012 as food store sales weakened notably after Christmas, data from the Office for National Statistics showed on Friday.

The budget surplus fell short of expectations in January and remained below last year's level due to a fall in income tax, another report revealed.

Retail sales volume, including automotive fuel, fell 1.5 percent month-on-month in January, which was the first decline in three months and the biggest since April 2012. Economists had expected sales to fall 1 percent, after a 2.5 percent rise in December.

The latest decline in sales has to be viewed in the context of the surge in sales in December and the very wet weather experienced in January, which will have deterred consumers from venturing to the shops, ING Bank NV's economist James Knightley, said.

Sales excluding automotive fuel, also decreased by 1.5 percent in January versus 2.7 percent increase a month ago. They were forecast to drop 1.2 percent.

Food store sales slipped 3.4 percent from December, while non-food store sales gained only 0.4 percent in January.

The sharp monthly drop in retail sales volumes in January is unlikely to herald the start of a consumer spending slowdown, said Samuel Tombs, a U.K. economist at Capital Economics.

On a yearly basis, retail sales volume including auto fuel, grew at a slower pace of 4.3 percent, following December's 5.3 percent rise. Likewise, growth in sales excluding auto fuel, slowed to 4.8 percent in January from 6.1 percent in December.

In a separate report, ONS said the budget surplus declined unexpectedly to GBP 4.7 billion in January from GBP 6 billion last year.

The surplus was expected to rise to GBP 8 billion. January budget balance usually shows surplus with income-tax and large installments of corporation tax receipts.

The public sector net borrowing (PSNB) figure excludes GBP 3.8 billion asset purchase facility transfer.

For the financial year to date 2013/14, PSNB excluding temporary effects of financial interventions was GBP 78.5 billion. This was GBP 15.6 billion higher than the same period in 2012/13.

At the end of January, public sector net debt excluding temporary effects of financial interventions was GBP 1.23 trillion, equivalent to 74.6 percent of gross domestic product.

January's public finance figures are not bad enough on their own to rule out a small pre-election giveaway by the Chancellor in the upcoming Budget on March 19, said Capital Economics' Tombs.

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