British retail sales growth slowed as expected in January, and the impact from a rise in sales tax at the start of the month was partly offset by widespread discounting, a survey showed on Thursday, according to Reuters. However, retailers polled by the Confederation of British Industry said they expected the next few months to be tough as household finances come under pressure from the rise in value added tax and muted wage growth. The CBI distributive trades survey's reported sales balance fell to +37 in January from +56 in December, which was an 8-1/2 year high. Analysts had forecast a fall to +35. "The lure of seasonal sales and price discounting may have helped mitigate some of the impact of the VAT increase on volumes, however, retailers expect the pace of sales growth to slow further next month and orders placed with suppliers have flattened out," said CBI chief economic advisor Ian McCafferty. There was little market reaction as markets held firm to the idea that the Bank of England would raise interest rates later this year to combat rising price pressures. Howard Archer, economist at IHS Global Insight, said the figures reinforced his view that consumer demand would remain muted this year as Britons feel the squeeze from rising inflation, small pay rises and government spending cuts. "Consumer confidence is low, unemployment is high and likely to rise further, other elements of the fiscal squeeze will increasingly bite as the year progresses, and debt levels are elevated. On top of this, the weakness of the housing market is not good news for consumer spending," he said. Indeed, the survey showed retailers expected sales growth to slow yet further in February, with the expected sales balance for February falling to +25 -- its lowest since July. "Consumer demand is expected to be weak in the coming months, as the spending power of households is hit by a combination of sharply rising prices and weak wage growth," McCafferty said. The CBI survey came after official data last week showed retailers suffered their worst Christmas sales on record, partly due to the heavy snowfall in December, which brought large swathes of Britain to a standstill. Thursday's data highlighted a particularly sharp fall in durable goods, while grocers, clothing and footwear stores recorded the strongest sales growth. Value added tax rose to 20 percent from 17.5 percent on Jan.4, while the national insurance payroll tax is due to rise in April.
