By Wiktor Szary and Jason Douglas
LONDON--U.K. retail sales shrank again in January, after posting the fastest monthly decline in over five years in December, data showed Friday, signaling that rising prices are squeezing Britons' wallets in the wake of the June Brexit vote.
The decline in retail sales could spell a slowdown for the consumer-driven British economy and comes at a crucial time for the ruling Conservatives, who are expected to begin divorce proceedings with the European Union by the end of March.
The retail sector contracted by 0.3% from the previous month, the Office for National Statistics said, the third consecutive month of declining sales. Analysts polled by The Wall Street Journal expected sales to have grown by 1.0% on the month in January.
The previous month's figure was also revised down, to -2.1%, the fastest monthly decline since May 2011. The annual pace of growth in January stood at 1.5%, the lowest pace of expansion in over three years and significantly below analysts' expectations.
The January slowdown in sales was driven to a large extent by rising prices of fuel and food, the ONS said.
U.K. shoppers initially appeared largely unfazed by the prospect of Britain's exit from the EU, with sales growing strongly over the summer and hitting a 14-year annual high in October. This resilience underpinned a robust economic expansion: the U.K. economy grew at the fastest pace in 2016 out of its peers in the Group of Seven advanced economies.
However, economists warn that stirring inflation and meager wage growth are likely to deter Britons from spending in the months ahead. Consumer inflation accelerated to a 2-and-a-1/2-year high of 1.8% in January and the Bank of England expects it to overshoot its 2% target in 2017.
Write to Wiktor Szary at Wiktor.Szary@wsj.com and Jason Douglas at Jason.Douglas@wsj.com
(END) Dow Jones Newswires
February 17, 2017 04:52 ET (09:52 GMT)
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