Official figures show that UK retail sales fell by more than expected in February, wiping out some of January's rebound. This came after a jump in prices, which was only partly due to the rise in VAT, hit sales volumes.
The Office for National Statistics said sales volumes including fuel fell 0.8% last month after a downwardly revised increase of 1.5% in January. That took sales up 1.3% over a year. Analysts had forecast a fall of 0.6% on the month and an annual rise of 2.3%.
The ONS said the fall in sales was broad-based. The only two sectors to record sales growth on the month were automotive fuel and non-store retailers.
It noted that prices including fuel leapt at their fastest monthly pace since 1994, up 2.5%. Excluding fuel, prices were 2.4% higher on the month - the biggest rise since the series began in 1988.
The ONS said that higher prices were only partly due to January's 2.5 percentage point increase in VAT. It noted that the rise in prices had been accompanied by a fall in sales volumes and said there were signs that high food prices were also having an impact on volumes in that sector.
The figures will add to the Bank of England's worries about rising price pressures and weak consumer demand. Excluding fuel, retail sales fell 1% on the month and were up 1.2% on the year.
High inflation, muted wage growth and the uncertain economic outlook are expected to weigh heavily on consumer spending in the months ahead, dampening a recovery in the economy which has in the past been heavily reliant on consumer demand.
Weak growth coupled with high and rising inflation pose a dilemma for the BoE. The central bank held interest rates at their record low of 0.5% this month, saying it was worried about the sharp deterioration in consumer spending.
