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U.K. March Retail Sales Surge on Warm Weather, Fuel Panic

U.K. retail sales rose at the fastest pace for more than a year last month as the warmest March for half a century boosted purchases of clothing and gardening products and panic buying lifted auto-fuel demand.

Sales including auto fuel gained 1.8 percent from February, when they fell 0.8 percent, the Office for National Statistics said today in London. The median forecast of 22 economists in a Bloomberg survey was for a 0.5 percent gain. Sales excluding fuel climbed 1.5 percent. A 0.4 percent gain was predicted.

The data add to evidence that the economy returned to growth in the first quarter, though the outlook remains fragile as inflation outpaces wages, continuing the squeeze on household budgets.

“There may be signs the consumer is returning to life,” said Peter Dixon, an economist at Commerzbank AG in London. “In a wider context, it’s added a bit more to consumption in the first quarter and therefore boosted the GDP number slightly. I think it’ll be sufficient to avoid a negative number.”

The pound rose as much as 0.2 percent against the dollar after the report and was trading at $1.6103 as of 9:57 a.m. in London, up 0.3 percent on the day.

Sales were boosted by the warmest March since 1957, with temperatures climbing above 20 degrees Celsius in the last two weeks of the month, according to the Met Office. This increased demand for clothing and footwear and spending at garden centers.

Panic Buying

Overall sales were also helped by panic buying of fuel toward the end of the month in anticipation of a strike by tanker-truck drivers, the statistics office said. Smaller fuel retailers said they lost out after they ran out of stock and were forced to close, costing them sales of confectionary and drinks.

The monthly increase in retail sales in March was the biggest since January 2011, when sales bounced back from disruption caused by snow. Fuel sales rose 4.9 percent from February, which was also the biggest rise for 14 months and the most for the month of March since records began in 1996.

Sales at non-food stores rose 3 percent on the month, with clothing sales climbing 2.3 percent and purchases at department stores increasing 1.6 percent. There was also a 0.9 percent increase in sales of household goods, while spending at “other stores,” which includes carpet shops, garden centers and pharmacies among others, jumped 6.2 percent.

Food Sales Down

Food sales fell 0.3 percent. In the first quarter, retail sales rose 0.8 percent compared with 1.1 percent growth in the fourth quarter.

Internet sales accounted for 8.5 percent of all retail sales in March, down from 8.8 percent the previous month, the statistics office aid.

Investors have driven up retailer shares. The General Retailers Index has risen almost 17 percent this year, compared with a 4.4 percent gain in the broader FTSE 350 Index.

Reports this week underscored the headwinds facing the British economy.

Consumer price inflation accelerated for the first time in six months in March and Bank of England officials warned that it may not slow as fast as projected two months ago. Prices of gasoline and diesel fuel both rose to record levels in March.

Consumer Squeeze

Meanwhile, wages rose just 1.1 percent in the three months through February, the least since mid-2010 and a third of the pace of inflation. Unemployment, which dipped to 8.3 percent from a 16-year high of 8.4 percent, is forecast to rise further as the government cuts tens of thousands of jobs to tackle the budget deficit.

In recent weeks, companies from Whitbread Plc to John Lewis Partnership Plc and Debenhams Plc (DEB) have warned of fragile trading conditions. Many stores were forced to offer deep discounts earlier in the year as concerns the euro-region debt crisis might tip the economy into recession hit consumer confidence.

“Current trading conditions are still difficult and consumer confidence remains subdued,” John Lewis Chairman Charlie Mayfield said on March 7.

The retail sales deflator, a measure of changes in shop prices, rose an annual 2.5 percent in March from a rate of 2.4 percent in February, the statistics office said. Excluding auto fuel, the deflator rose 2.1 percent versus 2 percent.

Surveys of manufacturing, services and construction suggest the economy has gained momentum this year after gross domestic product contracted by 0.3 percent in the fourth quarter. The statistics office is due to release its initial estimate of first-quarter GDP on April 25.

To contact the reporter on this story: Scott Hamilton in London at shamilton8@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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