-Howard Archer, chief European and UK economist at IHS Global Insight
Retail sales in the UK dropped in January more than expected to the lowest level in 12 months, led by a decline in food sales. The 0.3% decline followed the 0.2% increase in December, despite the fact that UK High Street shops have been cutting prices in order to attract customers. Average store prices fell 3.1% compared with the same period last year. Meanwhile, online sales jumped 12% since last January. Sales excluding fuel dropped by 0.7% in January, below market predictions of a 0.3% fall. Measured on an annual basis, total sales soared 5.4%, marking the 22nd straight month of growth, while sales excluding fuel dropped 4.8%.
A separate report showed, the UK's public sector finances improved with income and corporation tax revues increasing the most since records began in 1997. Nevertheless, Chancellor George Osborne still faces a challenge to meet borrowing targets before the national election in May. According to the Office for National Statistics, the UK public sector net borrowing excluding financial interventions came out in surplus by 8.8 billion pounds in January, the largest surplus since January 2008. This was due to increases in income tax and capital gains tax receipts, which surged 6.1%, while corporation tax and VAT receipts also rose, but stamp duties fell. According to the Office for Budget Responsibility, the government's fiscal goal for this year is 91.3 billion pounds, which if reached would be around 6.3 billion pounds less than in the previous fiscal year.
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