Retail sales drop at sharpest level for 18 months

Retail sales fell to 1.8% between December and January, according to the Office of National Statistics (ONS), confirming thoughts that the economy would be impacted by the lengthy bout of cold weather during this period.

The ONS report showed that fuel sales were one of the worst affected retail areas affected, having slipped by 11.1% on the month. Food sales also saw a drop of 2.4%.

However, while city analysts widely predicted a drop in retail sales, many have expressed their surprise that the figures fell at the rate that they did.

David Kern, Chief Economist at the British Chambers of Commerce (BCC), suggested that the results indicate further stimulus measures are required:

“These figures show that there is clearly no case for the MPC to scale down its £200bn QE programme, or to contemplate higher interest rates. Risks of a double-dip recession remain serious, and unless we see evidence that the economy is improving - from retail and other sectors - further measures to support growth may be needed.”

The Chief European Economist for Capital Economics, Jonathon Loynes, agreed that lower January sales figures were expected after the rise in VAT and the spell of bad weather. However, he went on to state that sales could bounce back over the following months.

Despite the poor retail sales figures, clothing saw a significant boost in the same period as a result of the cold weather.