Retail slump dampens RMI hopes

Published:  24 January, 2011

LONDON: Retail sales volumes dropped 0.8% last month from November the Office for National Statistics said this morning.

Sales were flat on the year, the weakest annual performance for any December since records began in 1988.

Kingfisher's B&Q chain has seen its sales weaken suggesting retail-driven repair and maintenance sales will falter too.

It is not solely poor weather causing the fall say analysts. Households are expected to cut back sharply in coming months, under pressure from rising taxes and higher living costs.

Hetal Mehta at Daiwa Capital Markets said: "These are hugely disappointing figures. Of course some fall in retail sales was to be expected given the disruption caused by the snow, but the extent of the fall suggests there is more to it than just poor weather deterring consumers."

"We now know just how high inflation was in December, and that would have added to the squeeze on households, offsetting any spending brought forward ahead of the VAT hike. It appears that the belt tightening started a little earlier than expected," she said.

She expects consumer spending to shrink by 0.4% between January and March, marking the first decline for a year.

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