Retail sales fall

Retail sales fall

Poor winter weather drove UK retail sales down by 1.8% between December and January, the sharpest drop in 18 months, official figures have shown.

The fall was more than three times faster than analysts had forecast. However the figures were weighed down by the inclusion of petrol in the official figures for the first time as drivers stayed at home in the snow.

The data, from the Office for National Statistics, adds to concerns about the fragility of the UK economic recovery. Sales by value were up 0.9% from January 2009. Fuel sales slipped by 11.1% on the month. When the impact of car fuel sales was stripped out, overall retail sales fell by 1.2%. Food sales fell by 2.4%, but the ONS said the cold weather had boosted sales of clothing.

Double-dip' risk

The period covers the first month since Value Added tax (VAT) returned to 17.5% after a temporary drop to 15%. This is thought to have brought some sales forward to December, thereby hurting the January figures.The data follows on from news that UK inflation had accelerated to 3.5%, that the government borrowed another £4.3bn in January to plug the growing hole in the UK's finances and there had been an unexpected rise in people claiming Jobseeker's Allowance. "January's retail sales figures round off a pretty awful week for news on the UK economy," said Jonathan Loynes, chief European economist at Capital Economics."Of course, we knew the January sales figures would be bad after the VAT rise and bad weather. But the drop is even worse than the retail surveys had suggested." He added that sales could bounce back in the coming months - but that as people's wages grew only slowly and prices roses, spending growth was likely to slow.
"At the very least, these numbers provide a very weak platform for sales in the first quarter of this year and therefore raise the chances that the economy may succumb to a double-dip uk recession," Mr Loynes said.

The so-called 'double dip' refers to an economy in recession returning to growth, then quickly contracting again.

From the bbc