Britain’s retailers received a respite from a two-month losing streak when spending in high street stores and online bounced back in February.
The Office for National Statistics said retail sales volumes were up by 1.4% on January and 3.7% higher than in February 2016.
Sterling rose on the currency markets after news of the rise was announced, but the ONS said the bounce back had failed to recoup all the ground lost in December and January. It noted that spending was being curtailed by higher petrol prices.
In the three months to February – considered a better guide to the underlying trend than the monthly figure alone – sales were 1.4% lower than in the quarter ending in November.
The ONS said the quarterly fall matched that seen in January, which represented the weakest retail performance since March 2010, when the economy was just emerging from recession.
Prices of goods were 2.8% higher in February than a year earlier, the sharpest increase since March 2012, with the cost of petrol up by more than 18%.
Kate Davies, the ONS’s senior statistician, said: “February’s retail sales figures show fairly strong growth, though the underlying three-month picture shows falling sales as February’s figures follow two consecutive months of decline in December and January.
“The monthly growth in February is seen across all store types. The underlying trend suggests that rising petrol prices in particular have had a negative effect on the overall quantity of goods bought over the last three months.”
A separate study of high street spending suggested that the recovery in spending during February might have continued in March.
The monthly distributive trades survey from the CBI showed that retailers had enjoyed better than expected trading conditions and were optimistic about a further improvement in April. Of the 65 retailers surveyed, 44% said business volumes were higher than a year earlier against 35% reporting a fall.
Anna Leach, head of economic intelligence at the employers’ organisation, said retailers continued to be squeezed by rising cost pressures and intense competition, limiting their ability to raise prices. “With household spending growth set to slow as inflation rises, retailers seem likely to remain under pressure through this year,” he said.
Ben Broadbent, one of the Bank of England’s deputy governors, said in a speech in London that the fall in the value of the pound was having an impact on spending in the shops.
“The vote to leave the EU led to a big drop in sterling’s exchange rate,” he said. “One consequence is a rise in import prices and a squeeze on households’ real income. We may already be seeing the impact of that squeeze on retail spending, which in real terms fell quite sharply around the turn of the year.”
Broadbent added that the flipside of weaker retail spending was that UK goods sold overseas had become cheaper. “While it’s hit the income of households, however, the depreciation has come as a boon for many exporters. In sterling terms goods export prices rose 12% through the course of last year. This will significantly have boosted exporters’ profitability and with it the incentive to invest in extra capacity.”
A combination of a more competitive pound and no change for the time being in trading rules with the EU meant exporters were currently in a sweet spot, Broadbent added, although he said it was unclear how long this period would last.
Chris Williamson, the chief business economist at IHS Markit said: “The consumer, which has provided the main engine of UK economic growth in recent years, is showing signs of running out of steam. Looking at the underlying trend, retail sales are falling at the fastest rate for seven years as households struggle with rising prices and subdued pay growth.”
UK retail sales shrug off Brexit fears with February rise – The Guardian