UK retail sales continue to bounce back
By Oliver Haill
Date: Thursday 21 Mar 2019
(Sharecast News) - UK retail bounced back more than expected last month, boosted by online non-food shopping and motor fuel sales.
Retail sales volumes increased 0.4% in February compared to January, the Office for National Statistics revealed on Thursday.
This followed January's 0.9% increase and was better than the fall of 0.4% that economists were expecting despite a decline of 1.2% in food stores.
Non-food volumes grew 0.9%, though clothing sales fell 0.3%. The headline growth was boosted by a 2.2% month-to-month jump in fuel sales.
Year-over-year growth eased to 4.0% from 4.1% in January but was again better than the average forecast of 3.3%. For the three months to February, retail volumes rose 0.7% on the previous three-month period.
The month-on-month fall in food stores was the strongest decline since December 2016, reversing the increase of 0.9% in January as supermarkets and specialist food and alcohol stores suggested this was part of "getting back to normal" following the January sales. However, last year food sales grew in February.
Rhian Murphy, ONS's head of retail sales, said: "Retail sales continued to bounce back in the three months to February with strong increases in fuel sales and online shopping."
However, online sales in February were up 9.4% year-on-year, but as a proportion of all retailing fell to 17.6% from the 18.8% reported in January.
The fall in food sales was perhaps in response to a further round of price rises driven by rising food import prices, said economist Samuel Tombs at Pantheon Macroeconomics. Overall, he felt the figures "show that the improving trend in real wages, and not the uncertainty created by the Brexit saga, is the dominant influence on households' spending at present".
For the first quarter as a whole, Tombs said volumes still will rise by 1.0% quarter-on-quarter even if February's increase in sales is reversed in March.
"And with the tight labour market set to ensure that real wages continue to rise at around a 1% year-over-year rate, plentiful job vacancies pointing to scope for further increases in employment and credit conditions still loose, we expect consumers' spending to keep rising at a solid rate in Q2, provided a no-deal Brexit is avoided," he said. "Consumers' spending accounts for two-thirds of GDP, so the downturn in business investment would have to become much more severe to tip the economy into recession."
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