UK retail sales dropped more than twice as much as economists forecast last month as the nation’s winter freeze thwarted spending on items from food to furniture.
Sales excluding gasoline fell 1.2 percent from December, the Office for National Statistics said yesterday in London. Economists predicted a 0.5 percent drop, the median of 26 forecasts in a Bloomberg News survey showed. The report uses new methodology in line with European rules.
The longest cold snap since 1981 snarled traffic and kept workers home last month just as British Chancellor of the Exchequer Alistair Darling raised value-added tax (VAT). With jobless claims at the highest since 1997 and the prospect of a government budget squeeze taking hold after the election, weakness in consumer spending may jeopardize the economic recovery.
“The snow has obviously had an effect on shoppers, and many of them may have pulled forward spending into 2009 to avoid the higher VAT,” David Page, an economist at Investec Securities in London, said in a telephone interview before the report.
“We expect retail sales to expand as growth picks up, though that may happen slowly. We haven’t seen a significant pickup in taxation and that may happen in the next year,” he said.
The new methodology now includes sales of gasoline and excludes the repair of personal and household goods. The most appropriate comparison with prior figures is the measure that strips out auto fuel, the statistics office said.
The retail drop last month was led by a 2.4 percent decline in sales at food stores, while non-food stores showed no change. Household goods shops reported a 13.4 percent decrease. Including fuels, sales dropped 1.8 percent on the month and rose 0.9 percent from a year earlier.
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