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UK Retail Figures: Kicking The Economy When It’s Down

19/02/2010

By Lea Pachta

Already reeling after worse-than-expected public finances data on Thursday, the UK economy has received another knock this morning following particularly weak retail sales figures.

Data has shown that sales in January fell by 1.2% on a month by month basis, the biggest monthly fall since March 2009. The market had already forecast a negative reading, expecting sales to have fallen by 0.5%. That the data came in substantially lower is testament to the frail state of public confidence in the economy.

Today's news will add to mounting concerns that the UK recovery is beginning to derail and the pound has fallen sharply across the board in response.

Duncan Higgins, senior analyst at Caxton FX commented, "Given the appeal of the post-Christmas sales, January is traditionally a positive month in terms of retail figures, which makes today's data all the more disappointing. In the wake of our surprising public deficit in January as well, fears will be mounting about the stability of the UK economic recovery."

"The markets reacted particularly violently to the news, with the pound dropping below €1.14 and extending its nine-month low against the US dollar," continued Higgins.
Duncan Higgins also added, "However, it must be noted that today's numbers do come as a consequence of both the rise in VAT back to 17.5% and the particularly poor weather conditions. These may well have skewed the figures and we will hopefully see a resumption of consumer spending in February."

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