The effects of the Brexit vote seem to be starting to make British consumers more cautious.
New figures show there was a cut back in spending at the beginning of the year as inflation picked up and prices rose.
Shoppers have driven a relatively robust performance for Britain’s economy since last June’s referendum to leave the European Union.
Retail sales volumes fell by 0.3 percent month-on-month in January – far weaker than economists had forecast. They were expecting a 0.9 percent increase.
Compared with January 2015, they were up 1.5 percent – their weakest performance since November 2013.
StatsKate</a> commenting on today’s official retail figures: <a href="https://t.co/s8rbGiDYiY">https://t.co/s8rbGiDYiY</a> <a href="https://t.co/0LDf8Idq6E">pic.twitter.com/0LDf8Idq6E</a></p>— ONS (ONS) February 17, 2017
The slump in the value of the pound after the Brexit vote is pushing up inflation, as is costlier crude oil leading to rising fuel prices.
The retail figures are the strongest sign so far that the UK economy is heading for a slowdown.
“Retail was the beating heart of the UK economy in 2016, so with consumer spending expected to slide in the coming months we could see the pound push lower against both the euro and the dollar,” said Paul Sirani, Chief Market Analyst at broker Xtrade.
Britain’s Office of National Statistics also said the sharp fall in sales in December was worse than it had previously estimated.
The weakening consumer sentiment caused the pound to fall to a 10-day low against the euro and a one week low against the dollar at one stage on Friday.