UK retail sales registered an enormous drop in January, ONS says

In January 2013 UK retail sales volumes fell by 0.6 per cent on the month (0% year-on-year), according to the latest data available today from the Office for National Statistics (ONS).

The consensus estimate had been for an increase of 0.5%.

Excluding automotive fuels retail sales volumes fell by 0.5% versus the prior month (Consensus: 0.4%).

When compared with year ago levels retail sales volumes declined by 0.6%. ONS pointed out that the quantity bought in the food sector was estimated to have fallen by 2.6% year-on-year, to the lowest level since April 2004, contributing the most downward pressure to the fall in the total quantity bought in the retail sector.

On a slightly more optimistic note, when compared with 2012 and for the last three months, retail sales volumes excluding automotive fuels rose by 0.9%.

The amount spent (value) in the retail sector was unchanged in January 2013 when compared with January 2012. Sales at petrol stations provided the main source of downward pressure to the amount spent in the retail sector. When sales at these stores are excluded the amount spent increased by 1.2% while volumes did so by 0.2%.

Commenting on today's data this is what Barclays Research had to say: "Some of the disappointment is due to bad weather: small retailers reported that heavy snowfall at the end of January affected sales. However, there is no escaping the fact that household demand remains weak.

"The average amount spent per week has been flat at about £6.7bn for more than a year, suggesting the hit to consumer confidence from high inflation and the poor labour market outlook has been as detrimental to spending as the 2008 financial crisis (see chart). With the squeeze on real household incomes set to continue, the outlook for retail demand looks poor."

The initial reaction to the data saw 'cable,' as the Sterling and US dollar currency pair are known in currency markets, drop to an intra-day low at 1.54875 dollars. Cable is now just 0.02% higher at 1.54615.

AB