Retail sales pick up in February, but consumer spending still weak in 2018
Retail sales beat expectations in February, but doubts remain about the resilience of UK shoppers’ demand in 2018. The Office for National Statistics (ONS) reported that sales volumes were up 0.8 per cent in the month, double the 0.4 per cent that City of London analysts had pencilled in. However, this followed a 0.2 per contraction in volumes in January, which was revised down from a previous estimate of 0.1 per cent growth.
That left volumes down 0.4 per cent on a quarterly basis, the weakest performance on this measure in just under a year. “February was a better month for the high street than January and December but that was not difficult and the retail picture remains extremely weak,” said Jeremy Cook of WorldFirst. Sales growth in February was driven by supermarkets, according to the ONS. There were also contributions from vehicle fuel and online shopping. But non-food retailers, including department stores and clothes shops, saw a fall in sales.
Some high-profile retailers, including Maplin and Toys R Us, have been forced into administration due in part to weak trading in recent months. “The underlying three-month picture is one of falling sales, mainly due to strong declines across all main sectors in December,” said Rhian Murphy of the ONS.
The latest data was also collected before the snow storms severely disrupted retail activity at the end of February. “All of the disruption caused by the bad weather will be concentrated in March’s data,” said Samuel Tombs of Pantheon. Retail sales account for around 20 per cent of UK GDP and have been a key support for overall GDP growth since the 2016 Brexit vote.
Analysts said that the latest data suggested retail sales will probably drag on growth in the first quarter of 2018. However, shoppers may get some relief from receding inflation, which moderated to 2.7 per cent in February, down from 3 per cent in January. Average wage growth also picked up to 2.8 per cent in the first month of the year.