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Snowy January hits UK retail sales

15 February 2013

Bad winter weather meant less footfall in British shops in January. Heavy snow caused retail sales to unexpectedly fall in January. That has reviving worries that the UK’s economy may be slipping into a third recession since the start of the financial crisis. Sales volumes were down by 0.6 percent, both from the previous month and in annual terms. Weak food sales were the biggest factor. Economists had been predicting growth. The Office for National Statistics also revised December’s numbers down. “The underlying picture is that the economy is bouncing along the bottom, so weather disruptions can easily tip it into negative territory,” said Rob Wood, economist at Berenberg Bank. Not just the snow High inflation in the UK has eroded spending power in recent years, with real wages now at their lowest since 2003. Little respite is on the cards. The Bank of England recently warned that inflation would remain high until 2016 and economic growth would be slow. Showing that other factors were at work than just the bad weather, sales between November and January posted their steepest fall compared to the previous three months since March 2010. In expenditure terms, retail sales account for roughly one fifth of Britain’s gross domestic product. Pressure on the government Another recession would pile pressure on Britain’s Conservative-led government, which has had to defend its austerity programme against criticism that it is stifling growth. The government says cuts are necessary to shrink a swollen deficit, but it also needs solid growth to meet its budget targets and bolster its chances of winning a general election in 2015. The pound hit a half-year low against the dollar and British government bonds extended gains after the retail data release.