Retail Sales in the UK Drop Unexpectedly in January

Retail sales in the UK fell unexpectedly during January for the third month, suggesting that consumers have started to feel the pinch from the continued rise of inflation.

The volume of overall goods sold at retail stores as well as online dropped by 0.3% following a plunge of 2.1% during December, said the Office for National Statistics Friday.

Market analysts were shocked as they were expecting an increase of 1%. In the three-month period through the end of January, sales fell 0.4%, which represented the worst performance for a quarter since 2013.

The figures are just additional evidence that the cooling in spending by households, that has been long awaited, has now materialized as Britons have found that their purchasing power has been eroded by the surge in prices.

That is a threat to the UK economy that is reliant on its consumer for its growth.

It appears that the consumer’s strong resilience, post Brexit in the UK has finally ended, said one economist in London. He added that it could become even tougher for Britons during 2017 across the UK.

The pound was down after the release of the data and was off 0.7% in late morning trading in London.

Inflation reached 1.8% in January and is currently forecasted to continue climbing during 2017 as the steep drop in the value of the pound since the Brexit vote increases the cost of imports.

The price in January of retail goods sold increased based on a complete year by over 1.9%, which represented its biggest increase since the middle of 2013.

The just released data shows that increased cost for food and fuel are significant factors in causing the slowdown in spending by UK consumers.

During January, declines occurred in sales of household goods, online products and food. That left overall sales 1.5% higher than the same period one year earlier, which was the weakest pace for a year in over three years. Sales that exclude gasoline were down by 0.2% during January.

The drop of 2.1% for total sales during December was a revision up from the previous 1.9% estimates and represented the largest drop in sales since May of 2011.

While some economists predicted inflation would exceed 3% in 2017, wage growth is anemic at only 2.6% putting income heading toward their worst 12-month period since 2013.

Other signs inflation was taking a toll emerged in figures from the Bank of England last month that showed a big fall in money borrowed in December by consumers.

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