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This week: retail sales down, inflation and deficit up

The ONS reported that sales volumes, based on a new methodology that includes automotive fuel, fell 1.8 per cent in January – three times faster than analysts had forecasted, and the biggest monthly fall since June 2008.

This is not good news for entrepreneurs in the retail space, which has already suffered more than other sectors in the past year.

The ONS said that unusually heavy snow at the start of January pushed down sales of household goods and fuel. The data shows that while the snowy weather resulted in a rise in sales of clothing and footwear, household goods slid sharply, by 13.4 per cent – the sharpest decline since January 1998.

“The snow has obviously had an effect on shoppers, and many of them have pulled spending into 2009 to avoid the higher VAT,” says David Page, an economist at Investec Securities in London.

This week the government also announced that it had borrowed £4.3bn in January, the first time since 1993 that a budget deficit has been recorded in January, as the recession hammered tax receipts.

Economists now predict that the budget deficit could rise to over £180bn this year – higher than the Chancellor’s forecast of a record £178bn, and proportionally higher than Greece’s deficit, whose economy is getting closer to bankruptcy.

Meanwhile, inflation figures were also released this week, showing that inflation rose to 3.5 per cent in January, the highest level in 14 months. The rise was attributed to the increase in VAT, which returned to 17.5 per cent in January.

All this bad news just underlines the fragility of Britain’s recovery from recession, and also raises fears that the economy could shrink again when first quarter GDP figures are released.

So we’re not out of the woods yet. How do these figures impact your business” Are you worried about the future of Britain’s finances” Leave your comments below.

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