Despite the wettest February since 1990 retail sales jumped 1.7 per cent over the month, rising three times faster than expected, official figures showed today.
The resurgence comes amid falling unemployment and inflation easing to a four-year low of 1.7%, heralding the prospect of a return to real-term pay growth for the first time in five years.
February’s sales growth was far above the 0.5% pencilled in by City economists. The surprise strength means that even if retail sales stagnate in March retail sales would still be up 1% over the first quarter. This would add 0.2 percentage points to overall growth, as retail spending accounts for 22% of the wider economy.
BNP Paribas economist David Tinsley said: “With such wet weather in February, if anything it seemed possible we would get a downward shock. In the event it was an upside whopper.”
Grocers accounted for the bulk of sales growth although non-store retailing — nearly two-thirds of which is internet sales — advanced 7.9% in February, marking the strongest month for the category since August 2006.
Less volatile quarter-on-quarter figures compiled by the Office for National Statistics meanwhile showed growth for the 12th month in a row — the longest period of sustained growth since November 2007.
But the spending spree has also raised questions over the sustainability of the recovery, as the Office for Budget Responsibility warns shoppers are fuelling consumption through digging into savings. But wages finally overtaking inflation this year would set the scene for a more long-lasting revival.
The Bank of England’s Financial Policy Committee is meanwhile keeping an eye on a rapidly-recovering housing market, which is also encouraging shoppers to open their wallets.
A statement following its meeting last week said: “Given the increasing momentum, the FPC will remain vigilant to emerging vulnerabilities, will continue to monitor conditions closely and will take further proportionate and graduated action if warranted.”
The retail recovery follows disappointing data on trade and production, although business investment spending is showing an upturn.Reuse content