Don't read too much into UK retail sales, economists say

DON'T READ TOO MUCH INTO UK RETAIL SALES, ECONOMISTS SAY

UK consumers upped their spending in January for the first time since August by more than anticipated, but economists are taking the numbers with a pinch of salt, for now.

A 1.7% month-on-month rise dwarfed the 0.3% increase expected by economists polled by Reuters.

But Investec economists, who expected a 0.8% rise, caution against reading too much into the data at this time of year, highlighting the tricky task of seasonally adjusting the figures around Christmas and New Year.

"The renewed strength of high street activity is largely due to a huge 5.6% rebound on the month in food store sales which had posted declines in each of the four prior months," they write, pointing out that sales in non-food outlets declined by 1.3%.

RaboBank also takes a measured view, saying the data comes after a "very disappointing retail sales during the all-important holiday month of December."

"Furthermore consumer sentiment continues to remain weak," they say.

At Capital Economics, economists think the surge in sales at supermarkets may be offset by softer sales in restaurants, as more people chose to eat at home.

"... with households in a fairly glum mood, we doubt it will last," they write.

The data comes alongside today's PMIs that showed British businesses are cutting staff at the fastest pace in more than four years, and follows Wednesday's hot inflation print and Tuesday's jobs data that showed accelerating wage growth.

Against this backdrop, the pound is holding around 2-month highs.

"Despite the overall retail sales rise, the data does little to change the picture of a stagnating economy, but there are now glimmers of light at the end of the tunnel, especially with more interest rates (cuts) expected this year," said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

(Lucy Raitano)

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