Surprise retail slump fuels recession fears

RETAIL sales across the UK unexpectedly fell in January hurt by heavy snow in some regions and reviving worries that the economy may be slipping back into recession.

Sales volumes fell 0.6 percent in both monthly and annual terms, the Office for National Statistics said, against expectations for growth.

Economists had forecast a 0.4 per cent rise in sales on the month and a 0.8 per cent increase on the year. The ONS also revised December’s numbers down. Weather is not the only problem facing consumers. Inflation has eroded spending power, with real wages now at their lowest since 2003.

Little respite is on the cards. The Bank of England warned on Wednesday that inflation would remain high until 2016 and economic growth would be slow.

The ONS said weak food sales, which posted their biggest monthly fall since May 2011, were the main reason behind the overall sales drop, with bad weather forcing some small grocers to close.

However, John Lewis said that sales at its department stores jumped by more than a fifth last week compared to a year earlier, although that number was flattered by heavy snowfall in February 2012.

The ONS said the quantity of food sold fell by 2.6 per cent compared with January last year, touching its lowest volume since April 2004.

The share of online food sales jumped by nearly a third, probably another reflection of the bad weather that kept shoppers at home.

Unemployment figures next week will provide further clues about the state of the economy at the turn of the year.