Retail sales steady in February

Retail sales unexpectedly held steady in February despite wet weather hitting in-store sales, according to figures from the Office for National Statistics on Friday

The ONS said retail sales volumes were flat in February, following an increase of 3.6 per cent in January (revised up from 3.4%).

However, the figure remained 1.3 per cent below the levels before the Covid-19 pandemic in 2020.

“Extreme wet weather in February translated into weak consumer spending and an uninspiring month for retail sales,” Jacqui Baker, head of retail at RSM UK and chair of ICAEW’s Retail Group, commented.

“Many retailers are still feeling the strain and will feel the UK chancellor missed an opportunity to support the industry in the recent Spring Budget. The upcoming increase in national minimum wage and business rates will only add to the current burden.”

The flat figures follow a couple of volatile months when sales volumes slumped 3.5 per cent in December after a weak Christmas trading period before jumping 3.6 per cent in January.

The ONS said heavy rain contributed to falls in sales at food and household goods stores but boosted online shopping.

However, clothes sales rose last month as consumers opted to shop around for promotions and new collections.

Clothing sales rose by 1.7 per cent – the biggest increase since December 2022 – after a 0.7 per cent decline in January.

Compared with a year ago, overall sales volumes were 0.4 per cent lower.

Separately on Friday, a survey showed British consumer sentiment held steady in March but households turned positive about the outlook for their personal finances for the first time in more than two years.

“Despite headwinds there are reasons to feel optimistic,” Baker said.

“With the latest National Insurance cut, energy prices set to fall further in April and inflation getting back on track, the hope is that this will give consumers’ the confidence to go out and spend more. Plus, with new season stock continuing to land, retailers can hopefully put an end to the prolonged discounting and focus on making back some margin.”

Thomas Pugh, economist at RSM UK, added that flat retail sales in February could still help to pull the economy out of recession in Q1 given the large rise in January.

“There are plenty of reasons to be more positive on the outlook for the rest of this year. Lower inflation, strong wage growth and falling interest rates will give households a boost to their disposable incomes in the summer,” he commented.

“What’s more, we expect consumer confidence to continue to improve, meaning that rising incomes should result in more spending. As a result, retailers probably won’t have to wait much longer before a material upswing in their prospects.”