Weaker retail sales suggest the UK's consumer spending engine could stall

Jasper Jolly
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Grocers report falling volumes (Source: Getty)

Retail sales fell in January in the UK, surprising analysts and adding to suspicions the consumer spending engine driving Britain’s growth may be about to sputter.

Almost a third of retailers surveyed report a decline in sales volumes in January, according to the Confederation of British Industry’s (CBI) distributive trades survey.

While the decline comes after a strong final quarter of 2016, it has still prompted concerns over the consumer spending plank of UK growth.

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The figures, which show a 65 per cent balance of grocers reporting lower sales, come as the latest growth data from the Office for National Statistics showed retail sales driving the UK’s 0.6 per cent GDP growth in the final quarter of last year.

Economists expect growth in private consumption to fall from 2.8 per cent growth in 2016 to 1.5 per cent this year.

The Brexit vote is partly to blame, despite the continued health of the UK economy. Sterling has fallen by around 15 per cent since the EU referendum, with inflation expected to dent retail sales soon.

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Anna Leach, CBI head of surveys and economic analysis, said: “Headwinds are on the horizon, as past falls in sterling are expected to push up inflation over the course of this year, which will be a real squeeze on household incomes. Retailers will be under the cosh for some time yet.”

Howard Archer, chief UK and Europe economist at IHS Markit, said the survey’s weakness “fans suspicion that 2017 is going to be a much more difficult year for the economy – with the consumer finding life increasingly challenging.”

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