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U.K. Retail Sales Unexpectedly Drop on Winter Weather

February 15, 2013

U.K. Retail Sales Unexpectedly Drop as Snow Deters Shoppers

Bank of England Governor Mervyn King said this week that inflation may accelerate in the coming months, intensifying a squeeze on consumers that has curbed spending in U.K. stores. Photographer: Jason Alden/Bloomberg

U.K. retail sales unexpectedly fell in January for a second consecutive month as snowfall kept consumers at home and incomes remained under pressure, hurting spending on food, household goods and auto fuel.

Sales including fuel fell 0.6 percent from December, when they dropped a revised 0.3 percent, the Office for National Statistics said today in London. The median forecast of 24 economists in a Bloomberg News survey was for a 0.5 percent increase. From a year earlier, sales declined 0.6 percent.

Bank of England Governor Mervyn King said this week that inflation may accelerate in the coming months, intensifying a squeeze on consumers that has curbed spending in U.K. stores. Marks & Spencer Group Plc, Britain’s biggest clothing retailer, said last month that pressure on household incomes will probably continue in 2013 and it is “cautious” about the outlook. Heavy snowfall in the second half of January also affected sales, the statistics office said.

“Clearly, the snow and ice affected footfall as people were unable, or unwilling, to go to the shops,” said Howard Archer, an economist at IHS Global Insight in London. “A concern for retailers, and the economy in general, is that consumers’ purchasing power has come under some renewed pressure.”

The pound reversed gains against the dollar after the report and was trading at $1.5477 as of 9:36 a.m. in London, down 0.1 percent on the day.

Sales of household goods fell 0.3 percent in January from December, the statistics office said. Food sales dropped 1.6 percent and sales of auto fuel declined 2 percent. Clothes and shoes rose 0.4 percent. Non-stores sales including internet purchases fell 0.5 percent. Excluding fuel, retail sales fell 0.5 percent in January from the previous month and were up 0.2 percent from a year earlier.

HMV, Jessops

The weakness of Britain’s high streets has also been underscored by the collapse of companies including HMV Group Plc, the U.K.’s biggest seller of CDs and DVDs, and camera retailer Jessops.

“Relative to previous recoveries, consumer spending remains weak,” the Bank of England said in its quarterly Inflation Report on Feb. 13. “The peak-to-trough fall in consumption was larger during this recession than previous ones, and the recovery has been more subdued.”

Pressure on consumers may continue after some of the U.K.’s biggest utilities raised gas and electricity prices. Inflation, which was at 2.7 percent last month, may accelerate in the near term and remain above the BOE’s 2 percent goal for two years, the central bank said. By comparison, annual wage growth was 1.4 percent in the quarter through November, ONS data show.

The retail report today also showed the annual retail sales deflator, a measure of changes in shop prices, was 0.8 percent. The deflator on food was 3.7 percent.

In the three months through January, sales dropped 0.8 percent, the biggest decline since the first quarter of 2010. The fall in sales in December was larger than the 0.1 percent initially estimated.

To contact the reporter on this story: Svenja O’Donnell in London at

To contact the editor responsible for this story: Craig Stirling at

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