UK: Retail Sales Fall More Than Forecast on Department Store Slump.

Sales fell 0.8 percent from January, when they jumped a revised 1.5 percent, the Office for National Statistics said in London. The median forecast of 24 economists in a Bloomberg News survey was a 0.6 percent decline in February. Sales at department stores dropped the most in two years. From a year earlier, overall sales increased 1.3 percent.

Retailers may face further pressure after the government increased sales tax and inflation accelerated to more than double the Bank of England’s target. Consumer confidence fell to a record low in February, and Chancellor of the Exchequer George Osborne, who is cutting public spending to rein in the budget deficit, said he will do what he can to “help families with the cost of living.”

“Given the strength of the January figures, we always expected some reaction last month,” said Peter Dixon, an economist at Commerzbank AG in London. “Given slow wage growth and the gloomier environment because of the VAT hike, these factors combine into a bit of a poisonous cocktail. It’s hard to see where the consumer strength could come from.”

The retail data showed sales at “non-specialized stores,” which mainly includes department stores, dropped 3.2 percent in February from January. Food sales slipped 0.4 percent, while clothing and shoe sales fell 1.3 percent.

Associated British Foods Plc (ABF) said Feb. 28 it’s seen a “noticeable slowing down” in U.K. demand at its Primark clothing stores this year.

Sales of household goods declined 2.5 percent in February, and the statistics office said consumers brought forward spending on items such as furniture and electrical appliances to January to beat the increase in sales tax to 20 percent from 17.5 percent. Retail sales were also boosted in January as spending rebounded after the coldest December in a century.

Next Plc (NXT), the owner of more than 500 fashion stores in the U.K. and Ireland, said today it will raise prices between 8 and 10 percent in the second half of the year to deal with an increase in input costs, more than previously planned.

“The consumer environment is likely to be dominated by the challenges of global inflation, public-sector cuts and limited growth in consumer credit,” Chief Executive Officer Simon Wolfson said.