UK retail sales fall in January but outlook remains positive

Posted by BankInfo on Mon, Feb 24 2014 03:52 pm

Retail sales in the UK fell in January after the pre-Christmas surge in spending, figures have shown, but sales remained stronger than a year earlier.

Sales volumes fell by 1.5 % last month, but this followed a strong increase in December when sales jumped by 2.5 %.

Sales in January remained 4.3 % higher than a year earlier, the Office for National Statistics figures showed.

Analysts said this showed the underlying picture remained positive for the sector.

"UK retail sales fell sharply in January, though the very strong figure in December always meant a drop was likely," said David Tinsley at BNP Paribas. 

"Despite the drop, there remains some solid momentum in retail sales," he added.

"While some of the pace of growth has eased back in the sector, it looks likely to still make a significant contribution to GDP growth in Q1.".

The ONS said that sales over the past three months compared with the previous three months - seen as a better measure of the underlying trend - were up 1.1 %.

'Improving health'.

The drop in sales during January from the month before was mainly due to weak trading at supermarkets and a fall in clothing sales. 

The ONS said non-food stores had seen "notable" annual sales growth, up 8 % from a year earlier.

Shops selling household goods recorded growth of 9.8 % from a year earlier - the strongest rate since July 2007 - although the ONS said the figure may have been boosted by weak sales in January 2013 when heavy snowfall affected trading.

Ian Geddes, UK head of retail at Deloitte, said: "In stark contrast to the flurry of January administrations seen in recent years, we saw no major retailers go under last month. This is a clear sign of the sector's improving health. 

"Despite the adverse weather that has affected the start of the year, retailers will be hoping that strong sales will continue into 2014."

UK bank interest rates increase in 2015

Posted by BankInfo on Mon, Feb 24 2014 12:11 pm

UK interest rates are likely to rise for the first time since the financial crisis in the spring of 2015, one Bank of England policy maker has said.

Martin Weale, a member of the Bank's rate-setting Monetary Policy Committee, said a spring 2015 rise was "the most likely path" in a Sky News interview.

He said a rates rise could come sooner if wages rise faster than expected.

Interest rates have been held at a record low of 0.5 % since 2008.

Mr Weale's comments follow last week's Bank of England inflation report, when Bank governor Mark Carney said interest rates were unlikely to rise even if the unemployment rate fell below 7 %, as is now expected in the coming months.

Mr Carney had previously suggested the 7 % unemployment rate as a threshold for considering an interest rates rise.

"I think it is very helpful that we try and explain the most likely path for interest rates is that the first rise will come perhaps in the spring of next year, and then the path is likely to be relatively gradual," Mr Weale told Sky News.

He added that he could "not rule out" an earlier increase, if average earnings increased quicker than expected.

Unemployment has fallen faster than many analysts expected in recent months, wages have not risen as quickly.

"You don't get much more specific forward guidance than what Martin Weale said," said Howard Archer, chief UK economist at IHS Global Insight.

"It really does tie in with what Mark Carney implied when presenting the inflation report and in the inflation forecasts contained in the report.".

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