Retail sales weak in January

Sales were up 0.1 percent in January, against analyst forecasts of a much larger 0.6 percent rise. This suggests consumers were somewhat reluctant to splurge in the January sales. The news is a further blow to the UK’s domestic economic prospects following December’s 1.4 percent decline.
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Weak consumer spending remains a significant headwind for the UK economy, figures from the ONS confirmed. Contributor Ben Brettell, Senior Economist – Hargreaves Lansdown.

Sales were up 0.1 percent in January, against analyst forecasts of a much larger 0.6 percent rise. This suggests consumers were somewhat reluctant to splurge in the January sales. The news is a further blow to the UK’s domestic economic prospects following December’s 1.4 percent decline.

We’ve been waiting for the pay squeeze to filter through to the high street, but for much of last year retail sales held up better than many expected. The big question now is whether this is the start of a worrying trend for the economy, or whether falling inflation and rising wages will come to the rescue. The monthly data is volatile, and it’s therefore hard to draw firm conclusions from two months of disappointing numbers, but it now looks certain the longer-term trend is one of slowing growth in the retail sector.

There could be some light at the end of the tunnel. The Bank of England says wage growth is on an upward trajectory, while inflation may well have peaked. This means we could see an end to falling real wages in the coming months, which would provide a welcome fillip to cash-strapped households. Assuming pay growth figures over the next couple of months back up this theory, it still looks like the MPC will have the confidence to raise interest rates to 0.75 percent in May.

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