RETAIL sales volumes only managed to grow 0.4 per cent last month, disappointing the market which had expected monthly growth of 0.6 per cent and dampening hopes of a strong first quarter GDP?growth figure today.
In spite of an upward revision to February’s figure, retail sales volumes contracted by 1.7 per cent quarter-on-quarter in the first three months of the year. This was the biggest quarterly drop since 1979.
Excluding fuel sales, volumes advanced by a smaller 0.2 per cent in March after February’s two per cent rise.
While the annual comparison showed growth of 2.2 per cent, this was in fact flattered by the timing of Easter. British Retail Consortium director general Stephen Robertson said: “This confirms the strong retail sales growth seen in March was mainly caused by the distorting effect of Easter. The seasonally adjusted figures actually show growth slowed compared with February.”
Although weak, the retail sales figures suggest that consumer demand is recovering from January’s snow and the 2.5 per cent VAT increase at the start of the year, said Investec’s Philip Shaw.
However, he added: “The level of sales has yet to recover fully from the weakness at the start of the year and volumes are now broadly down where they were last August.”
With consumers still struggling to get credit and unemployment high, the outlook for consumption is weak.
Analysts at Capital Economics said: “With the nasty combination of very weak wages growth and at least temporarily high inflation squeezing real income growth, and households still under pressure to repair their balance sheets, the outlook for consumer spending remains fragile.”
Retail sales values growth remained strong at 4.4 per cent in March on the same period of 2009 but this was largely due to rising inflation.