U.K. Retail Sales Rise More Than Forecast After Snow SlumpFergal O’Brien
U.K. retail sales rose more than economists forecast in February in a rebound from the previous month when heavy snowfall held back consumers.
Sales including fuel surged 2.1 percent from January, when they dropped a revised 0.7 percent, the Office for National Statistics said today in London. That was the biggest increase in almost a year and exceeded the 0.4 percent median forecast of 20 economists in a Bloomberg News survey. From a year earlier, sales increased 2.6 percent. The pound strengthened.
Britain’s economy is struggling to recover from a contraction at the end of 2012, and the rebound in retail sales may mask continued weakness in consumer spending. With faster inflation squeezing households, Chancellor of the Exchequer George Osborne sought to boost confidence yesterday by cutting the duty on beer, scrapping a planned hike in the gasoline levy and accelerating an increase in the tax-free earnings allowance.
“There is still some hope that the economy has avoided a triple dip,” said Vicky Redwood, an economist at Capital Economics Ltd. in London. “From here, it is encouraging that the budget provided some further help for households. Nonetheless, with real pay still dropping sharply, a sustained recovery in consumer spending still seems unlikely soon.”
The pound extended its advance against the dollar after the data. It was at $1.5178 as of 10:16 a.m. in London, up 0.5 percent from yesterday.
The growth in February was led by sales at “other stores” -- including computers and jewelry -- which rose 5.2 percent. Food sales increased 0.8 percent from the previous month, while clothing and footwear increased 1.5 percent. The statistics office said part of the surge in spending was due to people returning to stores after bad weather in January.
Excluding auto fuel, retail sales increased 1.9 percent in February from January and were up 3.3 percent from a year earlier, the report showed.
In a separate report today, the ONS said Britain had its smallest February budget deficit for five years after the Treasury received proceeds from the Bank of England and the sale of mobile-phone spectrum. The gap, excluding temporary support for banks, was 2.76 billion pounds ($4.2 billion) versus 11.8 billion pounds a year earlier. The median forecast in a Bloomberg News survey was for a deficit of 8 billion pounds.
In the retail report, the statistics office said Internet sales accounted for 9.7 percent of all spending in February. The average weekly spending online was about 541 million pounds, up 10 percent from the same month a year earlier.
Asos Plc, the U.K.’s largest online-only fashion retailer, said yesterday its domestic performance was “ahead of expectations” in the three months through February. The company is “positive” about the outlook, it said.
Pressure on consumer budgets may continue as inflation -- at 2.8 percent in February -- outpaces wage growth. The Bank of England said yesterday that price growth will probably remain above its 2 percent target for much of the next three years.
Labor-market data this week showed that pay growth excluding bonuses slowed to 1.2 percent in the three months through January, the lowest rate since December 2009.
John Lewis Partnership Plc, owner of the U.K.’s largest department-store chain, said on March 7 it expects sales growth to slow this year as the consumer environment “remains subdued.”
In his budget yesterday, Osborne cut his forecast for 2013 economic growth to 0.6 percent from 1.2 percent and his 2014 projection to 1.8 percent from 2 percent. He also said it’s taking “longer than anyone hoped” to overcome the “difficult economic circumstances.” Britain’s economy shrank 0.3 percent in the fourth quarter of 2012.