Retail sales slip to muddy economic waters

Added 17th February 2017

Retail sales in the United Kingdom slipped in January to undershoot forecasts, according to the Office for National Statistics.

Retail sales slip to muddy economic waters

Total sales dropped by 0.3% compared with December, in stark contrast to consensus forecasts of a 0.9% rise.

The ONS noted that higher fuel and food prices were significant factors in the squeezing of consumers’ budgets.

The news follows soon after the report earlier this week that inflation has risen to 1.8%, within striking distance of the 2% target.

“We have also this week seen inflation levels rise close to the Bank of England’s target, led by the impact of energy prices and the significantly weaker sterling which has raised import costs,” said Helal Miah, investment research analyst at The Share Centre. “Naturally this trend will raise questions about the level of consumer confidence and fingers will be pointed towards Brexit and whether it is finally beginning to show through in economic data.”

“Today’s data is therefore not presenting an encouraging picture for the economy going forward and further vindicates our position that the retail sector is in for a very tough time this year,” Miah continued. “The upcoming rise in business rates will be a further blow to retailers with a physical presence who are already facing stiff competition from online operators and have to decide on whether to pass on import cost onto the consumer. For UK investors, the implications will be mixed in the sense that today’s negative news will be positive and likely mean that interest rate rises will be delayed further into the future.”

UK retail sales failed to live up to expectations this morning, with the reading posting its second consecutive negative reading for the first time since early 2016,” said Joshua Mahony, market analyst at IG. “Probably the biggest warning sign was the December revision, which showed that in declining 2.1%, that month saw the second biggest fall in retail sales for 20 years. With a weaker pound, the idea was that people would spend more, yet recent months have instead shown that falling consumer confidence could be having a material impact upon spending.”

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Alex Sebastian

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Alex joined Portfolio Adviser in April 2014 and has been a financial journalist since 2008. He has previously held editorial positions at the Financial Times Group and Euromoney Institutional Investor. Alex is NCTJ qualified and has a degree in economics from the University of Sussex.

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