Retail sales volumes fell by 0.4 per cent in February, signalling a loss of momentum after a stronger start to the year, as shoppers pulled back on discretionary purchases and retailers brace for mounting cost pressures.
According to the latest data from the Office for National Statistics (ONS), the decline follows a revised 2.0 per cent rise in January and a modest 0.1 per cent increase in December. Falls were led by household goods, down 2.6 per cent, alongside a 1 per cent drop in clothing and a 0.5 per cent decline in online sales. Supermarkets also saw volumes retreat after January’s uplift.
Despite the monthly dip, the broader trend showed some resilience, with sales volumes rising by 0.7 per cent over the three months to February, driven largely by a rebound in non-store retailing after a weak November.
Industry analysts said February’s slowdown reflects a more selective and value-driven consumer. Nicholas Found, head of commercial content at Retail Economics, described spending as “narrow, highly selective and event-led”, with occasions such as Valentine’s Day offering only a modest boost before wider economic concerns took hold.
“This year is shaping up as a battle for market share against lacklustre economic growth,” Found noted. “Retailers are facing a tougher operating environment just as demand remains fragile, with rising labour costs, margin pressure and a growing need to invest in productivity and automation.”
“Consumer spending is still there, but it is far more concentrated and fragmented. The winners will be those combining sharp value perception, with genuine differentiation and disciplined execution across channels.”
Jacqui Baker, head of retail at RSM UK, said shoppers are increasingly prioritising essential or high-perceived-value categories, with health and beauty continuing to perform better than areas such as household goods, where purchases are often delayed until discounts appear. She added that even within clothing, performance is mixed, with sportswear benefiting from growing health and wellness trends.
“Another fall in consumer confidence in March, plus the ongoing Middle East conflict, and imminent rises in business rates and national minimum wage, means there are tough times ahead for retailers,” she warned.
“Further uncertainty and the likely prospect of higher energy costs for households who are already nervous doesn’t bode well for consumer spending. It’s crucial that retailers act now to preserve cashflow and identify areas for cost-cutting, while maintaining the customer experience, to help them ride out the storm.”
Thomas Pugh, chief economist at RSM UK, said the February dip was partly expected following January’s strong performance, but cautioned that the outlook is deteriorating. He warned that the rising energy costs as a result of the US-Israeli war on Iran, higher interest rate expectations and inflationary pressures are set to squeeze disposable incomes further in the months ahead.
“The longer the crisis goes on for the more likely consumers are to adjust spending habits in response as consumer confidence wanes. Indeed, we’ve already seen the first impact on consumer confidence with the fall in March. That sets a much tougher outlook for retailers than we were considering before the war,” Pugh said.
Retailers are also facing intensifying operational pressures. Justin Parr, chief credit officer at Treyd, highlighted rising energy and freight costs alongside shifting consumer behaviour, with shoppers likely to cut back on big-ticket purchases such as furniture and white goods.
“For retail businesses, energy prices and freight costs are already increasing and now they must make difficult decisions about how they manage stock. Many will reduce inventory levels before the situation deteriorates further and they face the prospect of cutting prices to shift excess stock. Even if volumes do hold up, such discounting will show up in weaker sales in the data to be released in the coming months,” Parr said.