World Economy

Inflation Adds to UK Rate Rise Pressure

Inflation Adds to UK  Rate Rise PressureInflation Adds to UK  Rate Rise Pressure

Retail sales saw only a slight pick-up in January as rising prices continued to dampen shoppers’ spending. UK sales volumes rose by just 0.1% in January from the previous month, the Office for National Statistics said.

The ONS said the longer-term picture showed “a continued slowdown in the sector”, partly due to “a background of generally rising prices”, BBC reported.

Inflation has been running at a higher rate than increases in earnings, eroding consumers’ spending power.

Sales volumes in January were up 1.6% when compared with a year earlier, the ONS said. That was the highest year-on-year rate since August, but was below analysts’ expectations.

Sports equipment saw stronger sales than usual, the ONS said, as shoppers set out to meet New Year resolutions to get fit, but this was offset by falling food sales.

“Retail sales growth was broadly flat at the beginning of the New Year with the longer-term picture showing a continued slowdown in the sector. This can partly be attributed to a background of generally rising prices,” said ONS senior statistician Rhian Murphy.

The data had a minimal effect on sterling—dropping back by a tenth of a cent to just below $1.41.

Economists were quick to warn that lackluster consumer spending—the major factor behind UK economic growth since the financial crash—risked knocking UK economic growth in the first quarter of the year.

Only last week, the Bank of England warned that the pace of growth was such that an earlier and sharper rate rise path was now likely to prevent the economy exceeding its current speed limit.

But Howard Archer, chief economic adviser to the EY ITEM Club, said the 0.4% rise in UK GDP he was now forecasting for January-March would not be enough to potentially deter the bank raising rates this spring.

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