British pound slumps to nine-month low versus U.S. dollar
By William L. Watts, MarketWatch
LONDON (MarketWatch) -- British retail sales slumped sharply in January, falling by a steeper-than-expected 1.8% from December, the Office for National Statistics reported Friday.
Compared to January 2009, sales volumes were up 0.9%. Also, December sales were revised down to show a 0.2% monthly fall and a 2.4% rise from December 2008. The ONS had previously estimated at 0.3% monthly rise and a 2.1% annual increase.
Economists had forecast a 0.5% monthly drop and a 1.1% annual rise.
The pound extended losses versus major rivals after the data, sliding to its lowest level versus the U.S. dollar since May. Sterling traded at $1.5375, a loss of 0.7% on the day.
The weak showing was partly due to poor weather, which kept consumers at home, said Peter Dixon, U.K. economist at Commerzbank.
It's also possible consumers reacted to the Jan. 1 expiration of a temporary cut in the value-added tax by cramming purchases into December, he said, but noted that retail sales toward the end of the year weren't particularly robust either.
"Although sales have generally held up well during the recession, there are indications that growth has lost momentum since mid-2009, with sales broadly flat since then," Dixon said in a research note. With the labor market likely to remain sluggish through 2010, retail activity may not show much strength in coming months, he said.
The January figures included a previously announced change in calculation methods. The headline retail sales index, in compliance with European regulations, now includes automotive fuel sales. At the same time, 'repair of personal and household goods' has been taken out of retail sales.
Excluding fuel, retail sales saw a 1.2% monthly fall and a 2.6% annual rise, the ONS said.
