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British retail sales tumble in January

British retail sales fell in January to record the first monthly drop in six months and biggest decline in more than a year.

india Updated: Feb 16, 2006 19:48 IST
Agence France-Presse
Agence France-Presse

British retail sales fell in January to record the first monthly drop in six months and biggest decline in more than a year, official data showed on Thursday.

Retail sales tumbled by 1.3 per cent in January from the December figure, the first monthly fall since July 2005 and biggest drop since December 2004, the Office for National Statistics said.

Analysts' consensus forecast had been for a rise of 0.2 per cent.

Sales climbed by 1.3 per cent in January from the equivalent figure 12 months earlier, far below market expectations of a 3.3-per cent gain.

Sterling fell sharply after the data's release as the figures pointed to a cut in British interest rates, analysts said.

The pound was being traded at $1.7314 shortly after publication of the data, down from 1.7371 moments before the release.

The euro rose to£0.6856 from £0.6836 previously.

"Given the extremely weak data this morning, sterling has fallen quite sharply," said HBOS currency analyst Naeem Wahid.

The monthly fall in retail sales contrasted with the 0.4-per cent rise in December and a 1.0 per cent gain in November. On a 12-month basis December retail sales were upwardly revised to 4.3 per cent from an initial estimate of 4.0 per cent.

A detailed look at the January data revealed decreases on the month for most sectors. Household goods stores showed the largest decrease at 3.0 per cent in January compared with December.

The data was published a day after Bank of England governor Mervyn King pointed to an improved consumer outlook.

Thursday's retail news "clearly casts some doubt (over) what was said at the Bank of England yesterday that the worst of the consumer slowdown is behind us," said HBOS economist Mark Miller.

Other economists said the data pointed to a cut soon in British interest rates.

The Bank of England "will end up trimming interest rates by a further 25 basis points in May," said Global Insight's chief Britain economist Howard Archer.

"Indeed, we would not rule out a cut before then if there is more disappointing news on the consumer front."

The BoE has kept British borrowing costs at 4.50 per cent since August 2005, when it decided to cut rates from 4.75 per cent.

Archer said that January's retail data bears out the belief that the firmer retail sales late in 2005 were inflated by many consumers spending heavily before Christmas.

"In addition, retail sales in late December were undoubtedly boosted by price conscious consumers seeking to take advantage of the best of the genuine deals in the post-Christmas sales," he added.

First Published: Feb 16, 2006 19:48 IST