Retail sales enjoy sharp rise

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Published: Thursday 26th March 2015 by The News Editor

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Retail sales rose by a sharper than expected 0.7% in February, suggesting that consumers were “spending the windfall” from lower food and oil prices.

Official figures showed the month-on-month increase in volumes was the strongest since November while year-on-year growth was 5.7%.

It comes two days after separate data showed inflation fell to zero, prompting fears that action may be needed to prevent a damaging slide into deflation with consumers putting off purchases as prices spiralled lower.

But today’s retail figures, published by the Office for National Statistics (ONS), appeared to dampen such concerns and any prospect that interest rates may need to be cut – or any rate hike pushed back – to combat low inflation.

The data helped sterling add a cent against the US dollar.

Scotiabank’s Alan Clarke said: “If you wanted a demonstration that low food and energy prices are good for consumer spending, then this is it.

“People are clearly not deferring their spending plans amid deflation speculation – they are spending the windfall.”

The year-on-year volume growth figure was the 23rd increase in a row, the longest period of sustained growth by this measure since May 2008.

Meanwhile the underlying pattern of three month-on-month changes in volumes bought saw the 24th consecutive month of growth – up 2%. This was the longest stretch of sustained growth since November 2007.

However, average store prices fell for the eighth month in a row, down 3.6% in February compared with the same month last year. This was the largest year-on-year fall since records going back to 1997.

The largest contribution to this was from petrol stations, down 15.5%, the largest fall for this type of store on record.

Figures showed the amount spent in the retail industry rose 2.2% compared with February 2014 and by 0.3% compared with January this year.

Average weekly spending last month was £6.6 billion compared with £6.5 billion in February last year and £6.5 billion in January this year.

The value of online sales in February rose 10.1% compared with a year ago but was 2.3% lower than the previous month.

Paul Hollingsworth, of consultancy Capital Economics, said: “February’s UK retail sales figures suggested that the recovery in spending has got back on track.

“With real wages now posting sustained rises, consumer confidence high, and unemployment low, the prospects for spending this year remain bright.”

Ben Brettell, senior economist at Hargreaves Lansdown stockbrokers, said: “A combination of rising wages and zero inflation means pay is recovering in real terms, having fallen significantly since the financial crisis.

“Lower fuel costs in particular are easing the pressure on household budgets, and the signs are that much of this extra disposable income is finding its way into retailers’ tills.

“The majority of the sales growth in the year to February came from non-food retailers, such as department stores and household goods retailers – this willingness to spend on non-essentials suggests consumers are feeling better off.

“Given that CPI inflation is expected to fall below zero in the coming months, and stay close to zero for the rest of the year, the signs are positive that the UK consumer can remain in rude health.”

Published: Thursday 26th March 2015 by The News Editor

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