Britain’s retail sales up in January, beats forecasts - GulfToday

Britain’s retail sales up in January, beats forecasts


Shoppers walk down Oxford Street in London. Reuters

British shoppers started spending again early this year after a sluggish end to 2019, another sign that improved sentiment since December’s election is translating into stronger economic activity.

Retail sales volumes rose by a greater-than-expected 0.9 per cent on the month in January after a 0.5 per cent fall in December, Britain’s Office for National Statistics said on Thursday. The recovery was even more marked if fuel sales are excluded: sales up 1.6 per cent on the month, the biggest increase since May 2018 and above all forecasts in the Reuters poll. Sales at petrol stations fell by 5.7 per cent in January, the most since April 2012, which the ONS linked to higher fuel prices.

Clothing sales grew by the most since May 2018 after several months of weakness. Consumer demand faltered in the latter part of 2019 amid a political deadlock in parliament over Brexit. Combined with weak business investment, that kept Britain’s economy from growing at all in the last quarter of 2019. Following a snap election in December, Prime Minister Boris Johnson returned to office with a comfortable majority.

Business and consumer sentiment has improved since then, as Britain left the European Union on Jan.31 with an 11-month transition deal. The data supports the Bank of England’s decision to leave interest rates unchanged last month, on expectations the economy will recover early this year. Sterling erased some earlier losses after the figures came out.

“The British consumer is a hardy beast and having weathered the pre-election uncertainty, we have charged back into the shops,” Jeremy Thomson-Cook, chief economist at payments company Equals Group, said. However, he added, the rebound might not last. Separate data earlier on Thursday showed employers had made the weakest annual pay offers in more than a year to staff during the three months to the end of January, and many economists predict Brexit uncertainties will re-emerge soon.

Annual sales growth remained lacklustre in January, up just 0.8 per cent on the year after 0.9 per cent annual growth in December, broadly in line with economists’ forecasts. Looking at the three months to January as a whole, annual sales growth was the weakest since May 2013. Excluding fuel, sales did not grow at all between August and December, the weakest such run since comparable records began in 1996.  Earlier in 2019, consumer demand had helped support growth, while businesses had put investment on hold until the course of Brexit became clearer. Britain has now left the EU, and after the 11-month transition expires at the end of the year, customs checks and new tariffs on trade with the EU are likely. British retailers had mostly reported subdued results for the Christmas period. Asda, the British supermarket arm of the world’s biggest retailer, Walmart, said that increasingly budget-conscious consumers were behind a fall in its underlying sales in the Christmas quarter.

Meanwhile the British inflation unexpectedly rose to a six-month high in January, pushed up by higher petrol prices and a smaller-than-usual drop in airfares, official data showed on Wednesday.

UK inflation in January rose to a six-month high as petrol and house prices rose, official figures show. The Consumer Prices Index (CPI) stood at 1.8 per cent last month, up from 1.3 per cent in December.”The rise in inflation is largely the result of higher prices at the pump and airfares falling by less than a year ago, official data showed.

The rise is ahead of economists’ CPI forecast of 1.6 per cent in January. CPI remains below the Bank of England’s 2 per cent target for inflation. Wednesday’s inflation data pushed the value of the pound above $1.30. Versus the euro, the pound had started the day down 0.25 per cent but rose back to trade flat against the single currency.

However, some analysts said that the new figures were unlikely to “move the dial” on the central bank’s next decision on interest rates in March.

The pound briefly strengthened by as much as a quarter of a cent against the US dollar following the figures, which showed consumer prices rose at an annual rate of 1.8 per cent compared with 1.3 per cent in December, not far off the Bank of England’s 2 per cent target.

A Reuters poll of economists had forecast a rate of 1.6 per cent. While inflation remains modest by historical standards, the figures hinted at a slightly stronger squeeze on household budgets.

The BoE said in January that it expected inflation to run below its target through 2020, bottoming out at around 1.2 per cent in the third quarter of this year. The Office for National Statistics also said British house prices rose in December at the fastest annual pace in just over a year, adding to signs of a rebound in confidence in the market since Prime Minister Boris Johnson’s election victory that month.


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