Retailers boosted by surprise jump in sales

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Consumers delivered a fillip to embattled retailers last month with better- than-expected sales, following a dire start to the year for the high street.

The Office for National Statistics (ONS) also said that online sales surged in March to account for a record 9.8 per cent of total sales, or nearly one in 10 pounds, as the migration of shopping on to the web continues apace.

Overall, it reported that retail sales volumes actually rose by 1.3 per cent in March on the same month last year, compared to the 0.9 per cent that economists had forecast.

However, the ONS data appeared at odds with recent results and retailers and economists reacted sceptically, given the huge pressures on household budgets from record fuel prices, tax increases and rising unemployment.

Emmanuel Hembert, a principal at the consultancy AT Kearney, said: "Optimism over UK retail must be moderated. We believe that the uplift is linked to specific sectors and circumstances – notably the impact of the royal wedding and unseasonably good weather driving up DIY sales."

The ONS confirmed that "anecdotally" retailers are getting a lift from consumers buying memorabilia ahead of Prince William's wedding on 29 April.

Retail sales volumes rose by 0.2 per cent between February and March, said ONS, against forecasts of a slump of 0.5 per cent.

Sales by value, including price rises, rose by 4.5 per cent in March, compared with the same month last year, driven by stronger food sales and general merchandise sales in March. Meanwhile, the warm weather helped garden centres and sports goods stores in the month.

According to ONS, food sales by value jumped by 2.9 per cent last month.

Mr Hembert said: "With regards to the pick-up in food sales, we mustn't overlook the fact that the generally weak recent results displayed by supermarkets is evidence of a general downward trend."

However, and perhaps surprisingly, small food stores are performing much better and registered a 2.5 per cent sales rise, compared to a 4.1 per cent decrease for the big grocers.

Tesco, the world's third-largest retailer, said its UK stores "can do better" after they posted a 0.2 per cent fall in its underlying sales, excluding petrol and VAT, for the year to 26 February.

But ONS said general merchandise stores had a better month, rising by 1.7 per cent overall. Among primarily non-food stores, the largest rise was in the "other stores" category, driven by a 7.4 per cent rise in sales of computers and telecoms shops.

More impressively, retailers grew their online sales by a massive 47 per cent to £528.5m in March on last year.

The better-than-expected retail sales in March led economists to forecast a rise in economic growth in the first quarter, following a 0.5 per cent decline in the final quarter of last year.

David Kern, the chief economist at the British Chambers of Commerce, said: "This news supports our belief that next week's figures will confirm an increase in GDP in the first quarter."

Retailers will be hoping that this momentum continues over the forthcoming two bank holiday weekends.

David McCorquodale, a retail merger and acquisition partner at KPMG, said: "Easter, the royal wedding and the sunshine should culminate in a welcome bright spot for retail but the fundamental issues in retail cannot be ignored."