The latest retail sales figures have been released by the Office for National Statistics, and they are generally bad news. Year on year, there has been recovery in the sector, with sales up 3.2 per cent in value terms and 1.0 per cent in volume terms, but in the short term retail sales fell 0.8 per cent in volume terms and 0.4 per cent in value terms between January and February, worse than expected. The ONS also revised down its January figures.
David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:
A fall in sales in February was widely expected following the relatively strong figures seen in December and January.
The poor weather in the first week of the month could have hindered the retail market, so these figures should not cause undue concern. Longer-term comparisons show that while the growth in sales remains in positive territory, the pace of expansion is modest. The value of sales has risen by more than 3 per cent over the past year, which is mainly due to inflation. If hikes in energy and food prices persist, this could create new obstacles to a sustained recovery in retail trade and in consumer spending in general.
Although non-store retailing (internet and mail-order shopping) is growing long-term as our headline chart shows, it too has suffered a weak February. Month-on-month, it shrank by 0.4 per cent, the biggest decline since August last year, and its annual growth, although easily outstripping offline retail, was "only" 8.6 per cent, the lowest year-on-year growth since November 2010. The proportion of sales made via the internet alone is estimated to have been 10.7 per cent of the total (excluding fuel, which remains tricky to buy online).
Price inflation in food stores rose to 3.9 per cent from 3.5 per cent last month, raising questions about the extent to which falling inflation (or "disinflation") will aid consumer demand as was predicted. The FT reports:
Simon Hayes, an economist at Barclays Capital, said he expected the pressure on real household disposable income to ease this year and consumption to strengthen. “However, falling inflation is a key element of our forecast that consumption will pick up, and recent upside news on consumer prices puts a question mark over the degree of support from this direction."