UK retail sales unexpectedly shrink in January, dragged down by grocers

A pedestrian carries shopping bags on Oxford street in London on Nov 17, 2016.
A pedestrian carries shopping bags on Oxford street in London on Nov 17, 2016. PHOTO: AFP

LONDON (REUTERS) - British retail sales fell unexpectedly in January, dragged down by the biggest decline in groceries sales since 2004, an industry survey showed on Thursday.

The Confederation of British Industry's monthly retail sales balance fell to -8 from +35 in January - the biggest one-month drop in the index since records dating back to 1983, and representing a small outright fall in sales volumes.

A Reuters poll of economists had forecast a smaller decline in the index +22, which would still have reflected solid growth.

The CBI figures, which cover the post-Christmas sales season from Dec. 28 to Jan. 13, contrast with mostly positive recent trading statements from major retailers.

"This month's decline was mostly driven by falling food sales and seems set to be short-lived, with retailers expecting sales to return next month," CBI economist Anna Leach said.

But she added that the prospects for the rest of 2017 were not so cheery given cost pressures on retailers from sterling's near 20 percent decline against the dollar after June's vote to leave the European Union. "Headwinds are on the horizon, as past falls in sterling are expected to push up inflation over the course of this year, which will be a real squeeze on household incomes. Retailers will be under the cosh for some time yet."

Official data last month showed British retail sales suffered their biggest slump in more than four years in December, denting what had been a promising fourth quarter.

Bank of England Governor Mark Carney has said he will keep a close eye on how Britons are spending their money this year, given the economy looks increasingly reliant on consumers to drive its growth.

Official data earlier on Thursday showed consumers drove a robust pace of economic growth in the fourth quarter, with no signs of a slowdown after June's Brexit vote.