UK consumers cut back on spending in January as Brexit-fueled inflation worries mount

Shoppers are reflected in a shop window as they walk along Oxford Street in London.
Shoppers are reflected in a shop window as they walk along Oxford Street in London.PHOTO: REUTERS

LONDON (REUTERS) - British consumers reined in their spending last month, an industry survey showed on Tuesday (Feb 7), adding to signs that they are turning more cautious as last year's Brexit vote pushes up inflation.

On a like-for-like basis - which excludes new store openings - sales fell by 0.6 per cent compared with January last year, the British Retail Consortium said.

It was the first time that like-for-like sales fell since August last year, which was shortly after voters decided in June to leave the European Union January's downturn represented a sharp reversal of December's 1.0 per cent increase.

Economists taking part in a Reuters poll had expected like-for-like sales to rise by 0.8 per cent in January.

Total sales inched up by 0.1 per cent, slowing sharply from an increase of 1.7 per cent in December and also the weakest performance since last August.

"These figures suggest that 'caution' was top of new year shopping lists and the uptick in credit card lending at the end of last year may be short lived," BRC chief executive Helen Dickinson said. "With the signs pointing to upward pressures on shop prices given rising import costs, all eyes will be on the impact of inflation on consumer spending."

A separate survey from Barclays credit card division also pointed to early signs that consumers are beginning to feel the strain of inflation.

Barclaycard reported a 4.4 per cent annual increase in retail spending during January, up from growth of 4.0 per cent in December, Barclaycard said.

However, this reflected a 15 per cent surge in petrol spending. By contrast, spending on electronics and department store goods fell last month.

Official data released last month showed retail sales volumes falling the most in more than four years in December.

And last week the Bank of England reported the first slowing in the pace of consumer borrowing for the first time in five months. The BoE says it expects inflation to rise to 2.75 per cent by mid-2018, but many economists predict it will go above 3 per cent, faster than increases in wages.