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UK retail sales fall unexpectedly

February 15th, 2013 Bussines

Shopper in the snow in JanuaryHeavy snowfall put people off from going out to the shops, the ONS suggests

UK retail sales fell unexpectedly in January, confounding economists’ expectations for a rise.

Volumes fell 0.6% from December 2012, hurt by heavy snowfall, the Office for National Statistics (ONS) said.

Volumes also fell 0.6% from a year ago, the first annual fall in 17 months.

The ONS highlighted weak sales in the food sector, which dropped 2.6% year-on-year to the lowest level since April 2004. It also said small stores had fared worse than large stores.

Smaller retailers in the food sector suggested that the heavy snow seen in the second half of January had affected sales.

In contrast, larger retailers suggested that some of the increase they saw came from a rise in online sales.

The amount spent online accounted for 10.1% of all retail spending, excluding fuel.

In the food sector, the proportion of online sales rose 27% on the year. That meant that online sales now make up a record 3.7% of all food sales.

The data for December, which had previously shown a 0.1% drop in monthly volumes, was also revised to show a steeper 0.3% decline.

The ONS data had an immediate impact on sterling, with the pound falling by more than a cent against the dollar to $ 1.5477.

Inflation impact?

By value, retail sales fell by 0.4% on the month and were unchanged on the year.

The ONS said that sales at petrol stations were the biggest contributor to the drop in the amount spent.

Kate Davies, Office for National Statistics

Kate Davies, ONS: “Small stores have affected the figures, large stores have faired much better”

Analysts were disappointed with the figures.

“If you define Christmas sales as the November to January period, this has been the second worst performance over the festive/sales period over the past 15 years,” said George Buckley, chief UK economist at Deutsche Bank, adding that 2009-10 was the worst.

But he noted that other surveys had held up better. For instance, the British Retail Consortium (BRC) has said that like-for-like retail sales in January rose 1.9% compared with January 2012 – the biggest rise in more than a year.

“Perhaps some of today’s weakness reflects higher inflation, which has risen by 0.5 percentage points over recent months,” he said.