Retail sales surge in February
By Abigail Townsend
Date: Friday 24 Mar 2023
(Sharecast News) - Retail sales jumped by more than expected in February, official data showed on Friday.
According to the Office for National Statistics, retail sales volumes were estimated to have grown by 1.2% month-to-month, following upwardly-revised growth of 0.9% in January.
It is the largest monthly increase since October 2022, which benefited from the additional bank holiday for the Queen's state funeral, and returns sales volumes to February 2020, pre-pandemic. Analysts had been expected a rise of just 0.2%.
Year-on-year, sales volumes were down 3.5% - although analysts had been expecting a far larger drop, of around 4.7% - and down 0.3% in the three months to February when compared to the previous quarter.
Driving February's increase were non-food sales, up 2.4% compared to January's 1.0% rise. Within that, sales in department stores rose 5.5% while clothing shops saw a 2.9% jump. The ONS attributed growth in both sub-sectors to strong sales at discount stores.
There was also strong growth in second-hand goods stores, the ONS noted, such as auction houses and charity shops.
Food sales volumes rose 0.9% compared to 0.1% in January. The ONS said there was some anecdotal evidence of reduced spending in restaurants and on takeaways, because of cost of living pressures.
Earlier this week, data showed that inflation had unexpectedly increased to 10.4% in February, while on Thursday, the Bank of England increased the cost of borrowing by 25 basis points to 4.25%.
Danni Hewson, head of financial analysis at AJ Bell, said: "Looking at the latest retail sales figures, you might be forgiven for wondering if Britain really is in the middle of a cost of living crisis. But consumers appear to be choosing supermarkets over takeaways, and are snapping up bargains wherever they can.
"Yes sales are back to pre-Covid levels, but that just shows an economy that's stagnant. Compare how much people are paying for the privilege of buying the same amount of stuff they did three years ago, and that's up a staggering 16.6%."
Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said: "Retailers benefited in February from the recent slight recovery in consumer confidence, but it's too soon to claim that a recovery has taken hold.
"The outlook for retail sales has improved since the budget, when the government scrapped planned increases in both the energy price guarantee and fuel duty. Many households will also see some relief in April when benefits, including the state pension, rise by 10.1%.
"Other fiscal actions in April, however, will impede growth in disposable incomes: the basic and higher rate thresholds for income tax will be frozen, the threshold for the additional rate of income tax will be reduced and the energy bill support scheme grant will be withdrawn.
"All told then, we think retail sales likely will merely hold steady in the second quarter and then will recover only gradually in the second half of this year."
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