UK January retail sales worst for 14 months

British retail sales growth this month slowed to its weakest in over a year, though not as much as analysts had feared, and retailers are more optimistic about future business, a survey showed yesterday.

The Confederation of British Industry said its distributive trades survey's reported sales balance fell to +4, its weakest rate since November 2006, from +8 last month.

Analysts had forecast no growth at all and the survey suggests that consumer demand is so far holding up despite fears of a swift slowdown in the economy this year.

"The CBI survey indicates that consumer spending is not collapsing, which reinforces the case for the Bank of England to cut interest rates gradually rather than aggressively given current significant inflation risks," said Howard Archer, an economist at Global Insight. Economists are unanimous in predicting that the Bank of England will cut interest rates next week. But the outlook for borrowing costs after that is still up for debate as some policymakers are worried about rising price ­pressures.

However, markets have priced in about four rate cuts this year and some analysts are concerned that the economy could slow sharply as consumer spending dries up and the housing market stagnates.

"The survey is hardly an encouraging first indicator of spending this month - and certainly fits in with our view that spending growth is set to slow sharply this year," said Vicky Redwood, an economist at Capital Economics.

The CBI, however, said retailers were more optimistic about the future, with the expectations balance registering +10.

"Overall, retail sales were still better than expected this month and the high street does predict a slight improvement in February," said John Longworth, chairman of the CBI's survey panel.

Mr Longworth said that while groceries and essentials were still doing reasonably well, people were cutting back on spending on expensive items such as ­televisions and washing machines.

The durable household goods sector saw its worst performance since October 2005.