Instant view - Retail sales tumble 1.8 pct in Jan

LONDON (Reuters) - British retail sales fell at their sharpest monthly pace in 1-1/2 years in January as the cold and icy weather pushed down purchases of household goods at the fastest pace since 1988, official figures showed on Friday.

The figures underline the fragility of Britain's recovery from recession and may raise fears the economy could shrink again when first-quarter GDP figures are released. The data will also likely reinforce expectations that interest rates will remain on hold for the most of this year.

KEY POINTS

- The ONS has reclassified the main retail sales measure to

now include automotive fuel and to exclude household and personal repairs.

- The ONS said that the cold weather hit sales of household

goods and fuel but boosted sales of clothing and footwear.

- Biggest mm fall in retail sales since June 2008

- Lowest yy gain in retail sales since June 2009

- Biggest mm drop in predominantly food stores sales since June 2008

- Biggest mm drop in household goods store sales since Jan 1988

ECONOMISTS' VIEWS

JONATHAN LOYNES, CAPITAL ECONOMICS

"The special factors at work make it hard to determine the underlying trend. High street spending grew at relatively solid rates in the second half of last year and it would be no surprise if sales bounced back in the next month or two. But we have been warning for some time that, with real income under pressure from very weak wage growth and, for now at least, rising inflation, spending growth was likely to slow. At the very least, these numbers provide a very weak platform for sales in the first quarter of this year and therefore raise the chances that the economy may succumb to a double-dip."

JAMES KNIGHTLEY, ING

"UK retail sales figures for January are awful. The fall in today's figure is far worse than that implied by both the British Retail Consortium and the Confederation of British Industry reports for the same period."

"Sales in aggregate should rebound in February, but given household debts remain high, incomes are under downward pressure and taxes are rising, consumer cash flows are likely to be restricted in 2010.

"This points to very modest retail sales growth through most of this year, which will keep Bank of England rhetoric dovish and sterling under pressure."

PETER DIXON, COMMERZBANK

"If you look at the retail sales index overall, it's been broadly flat since the middle of last year, there's a pattern emerging here of sales gradually slowing down. Maybe there are signs that consumers are tightening their belts a bit, because we had been surprised how well sales had held up until mid-2009.

GEORGE BUCKLEY, DEUTSCHE BANK

"It potentially raises the risk of a double dip. I don't think that will happen, but I do think that given all the issues the UK is facing at the moment -- there are near-term issues from the rise of VAT and snow at the start of the month, and quantitative easing has ended and the car scrappage scheme is ending in less than a month's time -- there is reason for broader concern."

"Looking forward you have the need to reduce debt levels in the household sector and public sector. It will reduce demand relative to what it would have been, and I don't think we'll see a very strong recovery."

ROSS WALKER, RBS

"It's not such a huge surprise in the sense that it seems to chime a bit more with the survey data. Comparing the values and volumes numbers, although there was a 1.2 percent fall in volumes, there was a smaller fall in values, which suggests the cash spend held up a bit better.

"It's a weak number but retailers are not at this stage resorting to aggressive price cutting to shift stock. Presumably this is because inventories are more under control."

AMIT KARA, UBS

"It seems to be largely weather-related. Monthly data tends to be volatile anyway, and this month being a January to start with, you have the usual issues related to Christmas.

"Then you have the restoration of the VAT rate which might contaminate the data, and then of course the weather. So whilst it is much weaker than expected, I'm not sure the expectations were high conviction."