No growth in retail sales as Britain battles out of recession

RETAIL sales unexpectedly stagnated in March as Britain struggles its way out of recession.

The amount bought by shoppers was unchanged last month, with no growth since February according to figures from the Office for

National Statistics (ONS). The stagnation defied analysts’ predictions of a 0.3pc increase and suggested that even though a short-lived recession has likely ended, households are still battling the cost of living.

Retail sales grew by only 0.1pc in February, revised up from showing no growth. The lacklustre data will, however, bring rate-setters at the Bank of England closer to lowering interest rates from a 16-year-high of 5.25pc, as it suggests inflationary pressures are easing.

Alex Kerr, of Capital Economics, said: “Today’s release may mean that the Bank of England is less worried about the possibility of a US-style resurgence

in GDP growth and stalling in disinflation.” The figures come after separate statistics showing wages are still rising faster than policymakers are comfortable with, while inflation fell by less than expected in March – both readings that suggest a summer rate cut could be premature.

Markets now expect the first cut as late as November, after previous predictions that borrowing costs would start falling in June.

In the US, hopes of imminent rate cuts have been dashed after the economy proved remarkably resilient in the face of high borrowing costs.

British shoppers last month bought more goods and motor fuel but held back on grocery spending and items from department stores, ONS figures show. Retailers selling second-hand items, hardware and furniture and clothes reported higher sales.

While households bought lots of new furniture, hobby supplies and clothes while stuck in lockdown, over the past two years they have instead spent on eating out and other services.

Thomas Pugh, an economist at consultancy

‘The Bank of England may be less worried about the possibility of a US-style resurgence in GDP growth’

RSM UK, said the latest figures suggested this was now changing. He said: “Retail sales volumes are still about 2pc below their pre-pandemic level.

“This is partly a hangover after a huge splurge in spending on goods during the pandemic. But after two years of reduced spending on retail goods, households will need to start replacing some of those things bought during the pandemic.”

While last month’s overall figure was worse than expected, Mr Pugh said the numbers were likely to improve from April’s tax cuts, wage increases and the housing market showing signs of revival.