Gloom spread further on the high-street as the UK retail sales for the month of January fell by 0.6%, below market expectations of 0.5%, triggering fear that Britain may be heading towards triple-dip recession. The Office of National Statistics (ONS) survey attrbuted the surprise fall to heavy snowfall which rendered poor business. Sales volumes also fell 0.6% compared to the previous year, registering the first annual fall in 17 months.
The ONS report highlighted weak sales in the food sector, which dropped 2.6% year-on-year to the lowest level since April 2004. The report also said small stores had fared worse than large stores. Smaller retailers in the food sector were affected by the heavy snowfall in the second half of January. Sales in food shops and petrol stations fell the most, down 1.6% and 2% respectively between December and January.
In contrast, larger retailers posted an increase in online sales. In the food sector, the proportion of online sales rose 27% on the year. That meant that online sales now make up a record 3.7% of all food sales. The total amount of online spending accounted for 10.1% of all retail spending, excluding fuel. The data for December, which had previously shown a 0.1% drop in monthly volumes, was also revised to show a steeper 0.3% decline.
The UK retail sales data raises concerns about the strength of the UK economy, which contracted by 0.3% in the fourth quarter of 2012. Analysts fear that it could shrink further in the first quarter of 2013, pushing it back into recession. The UK retail sales figures had an immediate impact on sterling, with the pound falling by more than a cent against the dollar to $1.5477.