A “whopper” of a month for retailers fuelled the economy’s recovery in February as sales soared more than three times faster than expected, official figures showed yesterday.
Despite the wettest February since 1990 retail sales jumped 1.7 per cent over the month, all but reversing January’s post-Christmas lull. The resurgence comes amid falling unemployment and inflation easing to a four-year low of 1.7 per cent, 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 per cent pencilled in by City economists. The surprise strength means even if retail sales stagnate in March they would still be up 1 per cent over the first quarter. This would add 0.2 percentage points to overall growth, as retail spending accounts for about 20 per cent of the wider economy.
David Tinsley, an economist at BNP Paribas, said: “With such wet weather in February, it seemed possible we’d 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 are internet sales – advanced 7.9 per cent 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 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 keeping an eye on a rapidly recovering housing market, which is also encouraging shoppers to spend. A statement last week read: “Given the increasing momentum, the FPC will remain vigilant to emerging vulnerabilities.”
The retail recovery follows disappointing data on trade and production, although business investment spending is showing an upturn.