UK’s private consumption likely to grow at 0.5% q/q in Q1 16

UK's January retail sales volume (incl. fuel) was better than expected as it came in at 2.3 %, above market expectation of 0.8% m/m. However, December's print was unexpectedly revised down by 0.4pp to -1.4% m/m.

All sub- factors recorded a positive growth on the month basis. The rise in the retail sales volume was led by non-food store retailing as it added up 1.5pp, increasing to 3.6% m/m. Food store retailing gained by1.1% m/m and automotive fuel increased by 2.5% m/m, contributing 0.4pp and 0.3pp, respectively. While non-store retailing was at 1.4% m/m, contributing only 0.1pp to the main factor.

"Today's print supports our baseline scenario that private consumption growth should print at 0.5% q/q in Q1 16 (down 0.1pp from Q4 15). Further out, in light of decelerating nominal wage growth and us expecting inflation to pick up gradually in 2016 (we forecast 0.8%), as well as the Government's impending fiscal consolidation, these factors are all likely to weigh on households' spending habits, eating further into consumption. As such, we see it easing to 0.4%/0.3% q/q by mid-2016" says Barclays in a research note.