Britain’s retail sales disappoint in sign of lacklustre recovery

UK retail sales stalled unexpectedly in March after shoppers scaled back spending on food and at department stories. The volume of goods sold in stores and online was unchanged in March after a revised 0.1% gain the month before, the Office for National Statistics said on Friday. Economists had expected an 0.3% increase.  

The figures add to evidence of a lacklustre recovery from last year’s recession. Consumer are still suffering from a cost-of-living crisis that forced them to pay more for the same amount of goods. While wages are rising rapidly and the Bank of England is expected to reduce interest rates, those forces have yet to fully feed through to people’s finances.

“Hardware stores, furniture shops, petrol stations and clothing stores all reported a rise in sales,” said Heather Bovill,” senior statistician at the ONS. “However, these gains were offset by falling food sales and in department stores where retailers say higher prices hit trading.”

The pound was little changed after the data, holding on an earlier drop of 0.3% to $1.2405.

Retail sales grew 1.9% in the first quarter, meaning the sector contributed 0.09 percentage point GDP during the period, the ONS said. The economy as a whole is expected to have expanded 0.2%, according to the median of forecasts in a Bloomberg survey.

Fuel sales provided a lift for the weak figures. Excluding auto fuel, overall sales fell 0.3% in March, erasing a gain of the same size the month before.

The figures were impacted by heavy rainfall in the first half of March, which carried on from the wettest February on record. Retailers say they’re seeing more normal spending patterns than during the years interrupted by Covid-19.

“Most consumer trends have gone back to where they were pretty much pre-pandemic,” chief executive of the UK’s largest clothing retailer Next Plc, Simon Wolfson said in an interview last month. 

Prime Minister Rishi Sunak’s Conservative Party is relying on this a “feel good factor” from higher living standards ahead of a general election expected later this year, Chancellor of the Exchequer Jeremy Hunt told Bloomberg earlier this week. 

Retailers including the UK’s largest grocer Tesco Plc have resorted to price cuts to attract shoppers — reducing inflation in UK stores to its lowest level in more than two years. 

“Retailers will be hoping that the bounce back of March sales is more than just an Easter blip,” Linda Ellett, head of consumer markets, leisure & retail at KPMG UK, said in a statement released by the British Retail Consortium last week. “Consumer confidence remains fragile, and households continue to keep a close eye on where their tight budgets are being spent.”