Retail sales up as public borrowing improves

City A.M. Reporter
Retail sales rose unexpectedly in March helped by stronger food sales on the month, while public sector borrowing for the fiscal year ending in March came in below the government's target, official data showed.

The Office for National Statistics said retail sales volumes including automotive fuel rose 0.2 percent last month after dropping by 0.9 per cent the month before.

Analysts had been braced for a weak retail sales number, after a very weak British Retail Consortium survey last week and the figures may therefore reassure Bank of England policymakers that consumer demand is stabilising.

The ONS said the rise was driven by stronger food sales and non-store retailing, with garden centres and sports good stores helped by dry weather in March.

Year-on-year, retail sales were 1.3 per cent higher. Economists had forecast a month-on-month fall of 0.5 per cent and an annual rise of 0.9 percent.

On the quarter, retail sales volumes were 0.3 per cent higher, suggesting the sector is poised to make a modest contribution to first-quarter GDP data due next week.

Supermarket chain Tesco said this week it failed to meet its UK profit expectations for the last year and expected conditions to remain challenging. On Wednesday, Home Retail, Britain's biggest household goods retailer, said it would face a hard time for at least this year.

There was also good news from public borrowing data released at the same time by the ONS, which covers the whole of the 2010/11 fiscal year.

The government's preferred measure, public sector net borrowing excluding financial sector interventions, came in at £141.142bn, comfortably below the £145.9bn predicted by the Office for Budget Responsibility at last month's annual budget.