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British shoppers' New Year diets squeeze January retail sales

* Retail sales inch up 0.1 pct month/month in January

* Surge in gym wear spending cancelled out by falling food

sales

* Weakest 3 months for retail sales since April 2017

(Adds reaction)

By Andy Bruce and David Milliken

LONDON, Feb 16 (Reuters) - British shoppers' New Year

resolutions to get fit proved less healthy for retailers last

month, as sales rose much less than expected and a longer-term

backdrop of rising prices and lacklustre wages also weighed on

growth.

Even (Taiwan OTC: 6436.TWO - news) by the standards of a normal January, demand for gym

wear and sporting goods was unusually high - but this was not

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enough to offset a chunky fall in the volume of food purchases,

the Office for National Statistics said on Friday.

Overall, retail sales volumes rose 0.1 percent on the month,

well below forecasts in a Reuters poll for a monthly rise of 0.5

percent, after dropping 1.4 percent in December.

In year-on-year terms, sales grew by 1.6 percent - the

fastest since August, but still right at the bottom end of

economists' range of forecasts.

"Analysts will no doubt be digesting these figures to

determine if this was a reflection of households setting about

2018 with the aim of shedding some pounds, or ... merely

symptomatic of the extent of the broader household cash squeeze

underway," Investec (LSE: INVP.L - news) economist Victoria Clarke said.

Britain's economy underperformed its rivals last year as

higher inflation - caused by the fall in the pound since June

2016's Brexit vote - hurt consumers' spending power, though

forecasts for a severe downturn proved too pessimistic.

The Bank of England expects the consumer squeeze to ease in

2018 as inflation cools from near six-year highs and wage growth

ticks higher, although surveys of British households suggest

sentiment remains subdued.

Andrew Sentance, a senior economic adviser to accountants

PwC and former BoE (Shenzhen: 000725.SZ - news) rate-setter, said it would take until the

second half of the year at the earliest until consumers felt the

benefit of lower inflation.

Consumer price inflation hit its highest in more than five

years in November, at 3.1 percent, and has barely fallen since,

though the narrower gauge used for retail sales dropped to a

six-month low of 2.8 percent last month.

"The first half of this year will continue to be a difficult

environment for retailers and other consumer-facing sectors,"

Sentance said.

Last week the BoE forecast real-terms household consumption

growth would slow to 1.25 percent in 2018 from 1.5 percent in

2017 as demand shifted towards business investment and exports.

Looking at sales over the three months to January, which

smoothes out sharp moves caused by November's Black Friday

discounts, sales inched up just 0.1 percent after a rise of 0.5

percent in the three months to December, marking the weakest

three-month period since April 2017.

The figures took some shine off sterling, which was headed

for its best weekly performance against the U.S. dollar in five

months.

In cash terms, spending in the three months to January was

4.4 percent higher than a year earlier, with 3.0 percent growth

in food spending. Shoppers are also stretching their budgets by

switch to cheaper food stores.

Market research company Kantar Worldpanel said last week

that Tesco (Frankfurt: 852647 - news) was the top performer of Britain's four

largest supermarket groups over the 12 weeks to the end of

January, posting sales growth of 2.6 percent. All four lost

market share to discount chains Aldi and Lidl.