Retail sales in biggest drop for three years

Retail sales suffered their biggest annual fall in nearly three years in January, as shoppers reined in spending after picking up pre-Christmas bargains, an industry survey showed on Thursday.

The Confederation of British Industry distributive trades survey's balance for reported sales volumes plunged to -22 in January from +9 in December, its lowest level since March 2009, when Britain was last in recession. Analysts had forecast a fall to -6.

The figures come a day after official data showing that the economy contracted by 0.2 per cent in the last three months of 2011, raising fears that the country was entering recession.

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Retail sales grew well in the three months to December, but many firms were concerned about the prospects for early 2012. Annual retail sales growth was flattered in December 2011 because of heavy snow a year earlier, but the CBI said January 2012 annual performance suffered because of relatively strong sales in the year-ago month.

The CBI's expected sales balance for February rose to -10 from -18, but firms expected to scale back the volume of orders they place with suppliers by the biggest amount since September 2009.

"Shoppers have reined in spending across the board at the start of the new year, after taking advantage of early discounting last month, which boosted pre-Christmas sales," said CBI chief economic advisor Ian McCafferty. "Consumers are still holding off, particularly from buying big-ticket items, like washing machines and fridges," he added.

The CBI said the decline in sales volumes was broadly based.

The figures are a first indication of how retailers fared in 2012 after mixed trading over Christmas. Soaring inflation and weak wage growth have piled pressure on Britons' budgets, making people much more reluctant to splash out on non-essential goods.

A raft of weaker retailers have gone to the wall in the last month. Even supermarket giant Tesco has suffered from the weak economic environment, issuing its first profit warning in living memory earlier this month after a difficult Christmas.