UK Retail Sales Fall Amid Rainy Weather, High Inflation

(RTTNews) - UK retail sales declined more than expected in March, as Britons shopped less amid the rainy weather and also due to high inflation that is pushing up the cost of living and has added strength to the case for yet another rate hike from the Bank of England next month.

The volume of retail sales including motor fuel decreased 0.9 percent from the previous month, preliminary data from the Office for National Statistics showed Friday. Economists had forecast a 0.5 percent fall. The latest decline came after two months of growth. February's gain was revised down to 1.1 percent from 1.2 percent. In the three months to March, sales volumes grew 0.6 percent from the previous quarter. "Retail sales fell sharply in March as poor weather impacted on sales across almost all sectors," ONS Director of Economic Statistics Darren Morgan said.

"However, the broader trend is less subdued, as a strong performance from retailers in January and February means the three-month picture shows positive growth for the first time since August 2021."

Excluding auto fuel, retail sales shrunk 0.6 percent on a month-on-month basis in March after a 2.1 percent gain in February.

Elsewhere, results of the monthly survey by the market research group GfK showed early Friday that the UK consumer confidence improved for a third month in a row as people were less pessimistic regarding the outlook for their own financial situation and that of the economy.

The GfK consumer confidence index for the UK climbed to -30 in April, which was the highest reading since February last year, just before the start of the war in Ukraine. Economists were looking for a score of -35. ING economist James Smith said sales volumes have essentially begun to flat-line since late last year. With the real wage story set to improve over coming months and confidence up in the latest figures, the worst is probably behind us for UK retail, the economist added.

"Admittedly, none of this points to a rapid rebound in retail activity, but is another piece of the jigsaw that suggests the UK economy will dodge a technical recession in the first half of the year," Smith said. Meanwhile, the Bank of England is set to focus more on high inflation that was stuck above 10 percent in March and wage data that suggest policymakers would opt for a 25 basis points hike on May 11, the economist added.

ONS data showed that sales at non-food stores shrunk 1.3 percent on a monthly basis in March after a 2.4 percent growth in February. Retailers attributed the decline to poor weather conditions throughout March, the agency said.

Within the group, department stores and clothing stores sales volumes fell 3.2 percent and 1.7 percent from the previous month.

Food store sales decreased 0.7 percent month-on-month following a 0.6 percent growth in February. This was partly due to shortage of some essential food items.

Retailer feedback suggested that the increased cost of living and rising food prices are continuing to damp consumer spending, ONS said.

Separate ONS data showed that 26 percent of adults experienced shortages of essential food items for the period from March 8 to 19. That was an increase from 18 percent in the similar period in February.

The proportion of adults who reported that they could not find a replacement when the items they needed were not available climbed to 36 percent from 25 percent. Sales in the non-store retail group, dominated by online retailers, dropped 0.8 percent in March after a 0.3 percent gain in February. Growth in motor fuel sales slowed to 0.2 percent from 1.2 percent. Retail sales were 3.1 percent lower than the same month last year and 0.7 percent below their pre-coronavirus February 2020 level, ONS said. The yearly decline was in line with economists' expectations.