Retail sales drop in January

Economists said Tuesday's weak figures might have been partly due to temporary factors, with heavy snow discouraging shoppers and a car scrappage scheme boosting demand for imports, but were nonethless a cause for concern.

The pound fell to a three-week low of 88.09 pence versus the euro after the data.

The snow also resulted in a sharp drop in new home-buyer enquiries in the Royal Institution of Chartered Surveyors' monthly survey, yet house prices still rose.

Policymakers had hoped that exports would lead the country out of its deepest recession in decades, rebalancing an economy that had previously been reliant on rapid house price rises and consumer spending.

"It is disappointing that imports of traded goods rose more than exports, and it does raise questions as to whether or not net trade can make a decent positive contribution to growth going forward and help the economy to rebalance," said Howard Archer, economist at IHS Global Insight.

The goods trade deficit with the rest of the world unexpectedly widened to 7.278 billion pounds, its highest since January 2009, after imports from non-EU countries shot up at their fastest rate since March 2005.

Some 300 million pounds of a roughly 1 billion pound increase in imports was oil-related, and another 225 million was linked to the aerospace sector, which is typically volatile.

A further hit came from government incentives to scrap second-hand cars, which have lifted imports of new cars but are due to expire next month unless extended.

"We are likely to see some improvement in the trade balance as the boost to imports fades," said Hetal Mehta, economist for the Ernst & Young ITEM Club.