UK Retail Sales Grow Less Than Expected

UK retail sales grew less than expected in January as high inflation squeezed consumer spending, figures from the Office for National Statistics revealed Friday. Retail sales rose 0.1 percent month-on-month in January, reversing a 1.4 percent drop in December. Nonetheless, this was slower than the expected 0.5 percent rise. 

Sales, excluding auto fuel, also grew only 0.1 percent, following December's 1.5 percent decrease. Sales were expected to gain 0.6 percent. Food sales decreased 0.4 percent, while non-food sales gained 0.7 percent in January. "Retail sales growth was broadly flat at the beginning of the New Year with the longer-term picture showing a continued slowdown in the sector," Rhian Murphy, ONS senior statistician said. "This can partly be attributed to a background of generally rising prices." 

With real incomes under pressure from weak nominal pay growth and above-target inflation, it isn't surprising that high-street spending growth has continued to lose momentum, Ruth Gregory, an economist at Capital Economics, said. But the worst of the real pay squeeze should now have passed, paving the way for a recovery in real spending growth this year, the economist added. 

Including auto fuel, retail sales volume increased 1.6 percent year-on-year in January, faster than the 1.5 percent growth logged in December but weaker than the expected 2.5 percent. Excluding auto fuel, retail sales growth improved to 1.5 percent from 1.3 percent in the previous month. Economists were expecting a faster 2.4 percent expansion.