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Retail forecast good despite greatest monthly sales fall since April 2012 Retail forecast good despite greatest monthly sales fall since April 2012
(about 1 hour later)
Retail sales fell at the fastest pace for more than a year in January led by a slowdown at supermarkets, though economists said the outlook for consumer spending was improving. Retail sales fell at the fastest pace for more than a year in January, led by a slowdown at supermarkets, though economists said the outlook for consumer spending was improving.
A slowdown had been expected after a strong Christmas and as wet weather dented spending in some areas. But the January drop was bigger than predicted at 1.5%, the biggest fall since April 2012, according to the Office for National Statistics. That compared with a 2.5% increase in the volume of sales in December, revised down a touch from 2.6% growth published last month.A slowdown had been expected after a strong Christmas and as wet weather dented spending in some areas. But the January drop was bigger than predicted at 1.5%, the biggest fall since April 2012, according to the Office for National Statistics. That compared with a 2.5% increase in the volume of sales in December, revised down a touch from 2.6% growth published last month.
The consensus forecast was for a 1% fall in January in a Reuters poll of economists.The consensus forecast was for a 1% fall in January in a Reuters poll of economists.
Retail sales were still up 4.3% on a year earlier, and while that too was weaker than the forecast for 5%, analysts said the overall picture was relatively buoyant.Retail sales were still up 4.3% on a year earlier, and while that too was weaker than the forecast for 5%, analysts said the overall picture was relatively buoyant.
"Today was always going to be about payback for earlier strength. In the event it wasn't too painful," said Alan Clarke, economist at Scotiabank. "Essentially over the combination of December and January we have seen an average gain of 0.5% month-on-month each month or 6% annualised – that is really good.""Today was always going to be about payback for earlier strength. In the event it wasn't too painful," said Alan Clarke, economist at Scotiabank. "Essentially over the combination of December and January we have seen an average gain of 0.5% month-on-month each month or 6% annualised – that is really good."
The ONS said January's weakness was down to supermarket sales, with those stores focussed on food sales experienced a 3.4% fall on the month. But against the backdrop of a strengthening housing market there were strong furniture, electricals and DIY goods.The ONS said January's weakness was down to supermarket sales, with those stores focussed on food sales experienced a 3.4% fall on the month. But against the backdrop of a strengthening housing market there were strong furniture, electricals and DIY goods.
Samuel Tombs, UK economist at Capital Economics said the underlying trend in UK retail sales was still strong. Samuel Tombs, UK economist at Capital Economics, said the underlying trend in UK retail sales was still strong.
"The sharp monthly fall in retail sales volumes in January is unlikely to herald the start of a consumer spending slowdown," he said."The sharp monthly fall in retail sales volumes in January is unlikely to herald the start of a consumer spending slowdown," he said.
"Looking ahead, retail sales should be boosted by continued strong growth in employment, rising confidence and the gradual easing of the squeeze on real pay.""Looking ahead, retail sales should be boosted by continued strong growth in employment, rising confidence and the gradual easing of the squeeze on real pay."
Economists said consumer spending was still likely to make a solid contribution to overall growth in the first quarter of this year, helped by inflation falling back in recent months, leaving shoppers with slightly improved real pay packets.Economists said consumer spending was still likely to make a solid contribution to overall growth in the first quarter of this year, helped by inflation falling back in recent months, leaving shoppers with slightly improved real pay packets.
Ian Geddes, UK head of retail at Deloitte, said the underlying strength in January also reflected a more robust retail sector.Ian Geddes, UK head of retail at Deloitte, said the underlying strength in January also reflected a more robust retail sector.
"Interestingly, we saw less heavy discounting of surplus stock in January, as most retailers got their Christmas order volumes about right. Despite this, January's figures are still strong, even without the added boost from these extra discount sales," he said."Interestingly, we saw less heavy discounting of surplus stock in January, as most retailers got their Christmas order volumes about right. Despite this, January's figures are still strong, even without the added boost from these extra discount sales," he said.
"In stark contrast to the flurry of January administrations seen in recent years, we saw no major retailers go under last month. This is a clear sign of the sector's improving health. Despite the adverse weather that has affected the start of the year, retailers will be hoping that strong sales will continue into 2014.""In stark contrast to the flurry of January administrations seen in recent years, we saw no major retailers go under last month. This is a clear sign of the sector's improving health. Despite the adverse weather that has affected the start of the year, retailers will be hoping that strong sales will continue into 2014."