Retail sales show zero growth despite ‘fresh two-year high’ for consumer confidence
There was a worse than expected performance for retail sales last month, defying predictions of a consumer-led pick up from recession for the UK economy.
The Office for National Statistics (ONS) reported sales volumes were flat in March, following an upwardly revised figure of 0.1% for the previous month.
It said sales at non-food stores helped offset declines at supermarkets.
Sales of fuel rose by 3.2%.
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ONS senior statistician Heather Bovill said of the overall picture: “Retail sales registered no growth in March.
“Hardware stores, furniture shops, petrol stations and clothing stores all reported a rise in sales.
“However, these gains were offset by falling food sales and in department stores where retailers say higher prices hit trading.
“Looking at the longer-term picture, across the latest three months retail sales increased after a poor Christmas.”
While the performance will not damage the expected exit from recession during the first quarter of the year, it suggests that consumers are still carefully managing their spending.
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While the cost of living crisis – exacerbated by the Bank of England’s interest rate rises to push inflation down – has severely damaged budgets, wage growth has been rising at a faster pace than prices since last summer.
Separate ONS data this week has shown the annual rate of inflation at 3.2% – with wages growing at a rate of 6% when the effects of bonuses are stripped out.
Economists widely believe consumer spending power will win through as the year progresses, despite borrowing costs remaining at elevated levels.
Inflation slows to 3.2%
A measure of consumer confidence released on Friday showed confidence had increased for a sixth consecutive quarter to its highest level since the summer of 2021.
Deloitte’s measure showed an increase of 6.5 percentage points on this time last year.
Its survey cited an improvement in personal finances as inflation eased.
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The company’s consumer insight lead Celine Fenech said of its findings: “It is encouraging to see that consumers are feeling more confident in their personal finances – particularly younger consumers.
“Many consumers are paying less for essentials such as utility bills… however, spending on non-essential goods and services dropped this quarter, meaning that improving confidence is not yet translating to a significant boost to spending, and cautious optimism is required.”
She added: “Consumer confidence at its highest level in two-and-a-half years combined with the weather hopefully improving, should signal a brighter outlook for the consumer sector.”