U.K. retail sales rose almost four times as much as economists forecast in January as consumer spending rebounded after the coldest December in a century.
Sales gained 1.9 percent from the previous month, when they fell a revised 1.4 percent as snow and freezing temperatures kept Britons from shopping, the Office for National Statisticssaid today in London. The gain was the biggest since February 2010 and exceeded the 0.5 percent median forecast of 22 economists in a Bloomberg News survey. From a year earlier, sales increased 5.3 percent.
While the data add to evidence that the economy’s 0.5 percent contraction in the fourth quarter may have been a temporary setback to the recovery, retailers may face pressure this year. Inflation has accelerated to double the Bank of England’s target and tax increases may crimp spending power.
“It’s a big rebound,” said Howard Archer, an economist at IHS Global Insight in London. “It’s good news, but with rising inflation and low wage growth squeezing incomes and high unemployment and speculation of a rise in interest rates, I have serious concerns about consumer spending this year.”
The pound rose as much as 0.3 percent against the dollar after the data were published. It traded at $1.6213 as of 9:37 a.m. in London. Government bonds declined, with the yield on the 10-year gilt rising 2 basis points to 3.78 percent.
Tax and Snow
Sales at “non-specialized stores,” which includes department stores, jumped 5.7 percent in January from December and were up 10.7 percent on the year, the statistics office said. Clothing and shoe sales rose 3.4 percent on the month. Sales at food stores rose 0.3 percent on the month and fell 2.3 percent from a year earlier.
The statistics office said the government’s increase in value-added tax and the freezing weather affected demand in December and January and it estimates sales growth of 0.5 percent over the two months.
The food-store price deflator, a measure of annual price changes, rose to 5.2 percent in January from 5 percent in December. The deflator for all retail sales was 2.7 percent.
Consumer-price inflation accelerated to 4 percent in January, data this week showed. The rate may rise further as retailers pass on the government’s sales-tax increase, which took effect last month.
Excluding fuel, sales increase 1.6 percent in January from December and were up 5.3 percent on the year. Sports Direct International Plc, the U.K.’s No. 1 sporting-goods retailer, said yesterday that retail sales for the 13 weeks to Jan. 23 rose 14 percent and the company’s underlying performance has been “strong” since the end of last month.
‘Too Optimistic’
Internet sales accounted for 10 percent of all retail sales, compared with 7.6 percent a year earlier. Average weekly internet sales in January amounted to 523 million pounds ($847 million), the statistics office said.
The Bank of England said in its Inflation Report this week that consumer-price growth will accelerate this year before easing to its 2 percent target by the middle of 2012. Policy makerAndrew Sentance said yesterday that the projection is “too optimistic” and the central bank should raise its benchmark interest rate to tame price pressures.
Kingfisher Plc, Europe’s largest home-improvement retailer, said yesterday it expects a “particularly tricky” first half, with only a “slightly better second half” as the value-added tax increase and public-sector job cuts discourage spending.
Underlining the fragility of the U.K. labor market, jobless claims unexpectedly rose in January, while unemployment based on International Labor Organization methods rose by 44,000 in the fourth quarter to 2.49 million. Nationwide’s index of consumer sentiment dropped 7 points to 47 in January, almost erasing the 8-point gain in December, the lender said on Feb. 16.
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