The retail sector began 2013 on a soft note with real sales surprisingly falling 0.6 percent on the month after a slightly steeper revised 0.3 percent drop in December. Compared with a year ago, volumes were also down 0.6 percent.
Although purchases of auto fuel were particularly weak, off 2.0 percent versus year-end, even excluding this sector sales slid 0.5 percent from December and were up just 0.2 percent from January 2012. However, a number of categories are likely to have been hit hard by heavy snowfall, a view supported in the slump in the demand for petrol.
In fact, discretionary sales held up quite well. Hence, while excluding fuel, purchases of food were off 1.6 percent on the month non-food saw a 0.6 percent increase. In no small way this was due to a bounce at non-specialised stores (1.6 percent) although clothing (0.4 percent) and the other stores category (0.8 percent) both chipped in. Even so, there were monthly falls in household goods (0.3 percent) and non-store retailing (0.5 percent).
Inflation news was quite positive with the retail sales deflator up just 0.8 percent on the year, only a tick higher than in December. The acceleration here was mainly due to another marked increase in food prices and higher bills were likely largely responsible for a 1.4 percent drop in food purchases over the last three months.
With weather distortions clouding the interpretation of the January data, the underlying picture of retail demand is unclear. That said, overall sales have now fallen for four consecutive months and currently stand at their weakest level since last April. This is not good news for first quarter GDP and will ensure that speculation about additional QE at some point continues to simmer gently.