Retail sales fall 1.8 per cent

Retail sales slumped in January as heavy snow blitzed the high street, official figures showed today.

Sales volumes fell by a bigger than expected 1.8 per cent compared to the previous month, according to the Office for National Statistics (ONS).

The figures were also weighed down by the inclusion of petrol in the official figures for the first time as drivers stayed at home in the poor weather.

The 1.8 per cent fall is the biggest month-on-month decline since the early stages of the slump in June 2008, while December's sales were also revised down to a 0.2 per cent fall instead of the 0.3 per cent growth initially registered.

The disappointing figures increase the risk of a slide back into recession in the opening three months of this year after the UK crawled to 0.1 per cent growth in the final quarter of 2009.

The figures revealed a 13.4 per cent slump in sales volumes for household goods stores in January, while food retailers registered a 2.4 per cent decline. Petrol sales volumes were down 11 per cent, more than offsetting gains for clothing and department stores.

Stripping out petrol, overall sales volumes fell 1.2 per cent in January, which is the biggest month on month drop since February last year.

IHS Global Insight economist Howard Archer said the the weak data reinforced concerns over a "double-dip" recession as retailers were hit by a "perfect storm".

As well as the bleak winter weather, VAT has been hiked back to 17.5 per cent and firms have controlled stock more tightly to protect profit margins.

ING Bank economist James Knightley said: "Sales in aggregate should rebound in February, but given household debts remain high, incomes are under downward pressure and taxes are rising, consumer cash flows are likely to be restricted in 2010.

"This points to very modest retail sales growth through most of this year."

The pound also dropped on the news as markets bet the Bank of England could wait for longer before tightening monetary policy in the face of prolonged consumer weakness.