Brexit latest: Retail sales beat expectations in February but biggest three-month decline in seven years

Sterling jumped 0.4 per cent to $1.2517 in the wake of the release

Ben Chu
Economics Editor
Thursday 23 March 2017 10:31
Comments
Sales volumes grew by 1.4 per cent in the month
Sales volumes grew by 1.4 per cent in the month

UK retail sales grew strongly in February, beating City of London analysts expectations and sending the pound sharply up.

Sales volumes grew by 1.4 per cent in the month, well ahead of the 0.4 per cent growth the City consensus had anticipated.

The data ends a run of three consecutive months of declines, which has been interpreted as a possible sign the UK consumer is running out of steam.

Sterling jumped 0.4 per cent to $1.2517 immediately after the release.

However, over the three months to February the data still showed the biggest slide in sales volumes in almost seven years, with sales down by 1.4 per cent.

A 0.3 per cent decline registered in January was revised down to a 0.5 per cent contraction.

The Office for National Statistics said that rising petrol prices, due to the slump in the pound since the Brexit vote, seemed to be hitting consumption.

February jump...

Household consumption has been largely responsible for the overall economy's stronger than expected performance since last June's referendum.

The economy is estimated to have grown by 0.6 per cent in the third quarter of 2016 and 0.7 per cent in the final quarter.

Retail sales account for around 30 per cent of household spending and is seen as a crucial indicator of underlying activity.

...but still worst quarterly performance since 2010

“The latest UK retail sales figures will provide some reassurance that higher inflation has not brought growth in consumer spending to a halt,” said Paul Hollingswoth of Capital Economics.

“It looks like households aren’t ready to end the party just yet,” said Kallum Pickering of Berenberg.

But other economists said the bigger picture remained unchanged, with higher inflation set to bear down on consumption and slow the wider economy in 2017.

“Ignoring the fact that UK retail sales growth beat expectations today, the overall picture is still one of slowing growth,” said James Smith, economist at ING.

Separately, the CBI's latest monthly Distributive Trades report on Thursday showed 44 per cent of retailers saw higher sales volumes in March, while 35 per cent said they were down. The resulting +9 balance was unchanged from February.

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