Retail sales tumble amid spending squeeze

Rising prices continue to put pressure on the UK's consumer market as official figures show retail sales dropped by 0.3% last month.

The research, released by the Office for National Statistics, suggested that a 1.9% increase in average store prices in the year to January - mostly driven by a 16% jump in petrol costs - had led to the first fall in underlying sales since December 2013.

Economists had predicted growth of 1%.

Year-on-year figures showed that the quantity bought in the retail industry in January grew by 1.5% compared to the same month of 2016, but this marked the lowest level of growth in over three years.

The data comes as inflation statistics released earlier this week showed the fall in the pound is pushing up costs as imported goods become more expensive.

Inflation reached its highest levels since June 2014 in January, rising to 1.8% from below zero less than 18 months ago.

Labour market statistics also showed that wage growth slowed by 0.2% in the three months to December.

Commenting on today's official retail figures, Kate Davies, ONS senior statistician said: "We have seen falls in month-on-month seasonally adjusted retail sales, both in conventional stores and online, and the evidence suggests that increased prices in fuel and food are significant factors in this slowdown."

Online sales did see a 10% increase year-on-year, but dropped by more than 7% compared to December.

Howard Archer, chief UK and European economist at IHS Global Insight, said the data indicated that the slowdown in the economy, which was widely predicted to occur following the Brexit vote, was now under way.

"The economy's persistent resilience since last June's Brexit vote has been largely built on consumers keeping on spending," he said.

"If consumers really are now beginning to moderate their spending, the long-anticipated slowdown in the economy may be about to materialise."

"Consumer fundamentals remained largely healthy until recently, but purchasing power is now being meaningfully squeezed by markedly rising inflation.

"This was reinforced by a dip in earnings growth in December."