Retail sales bounce points to resilience of UK economy but reveals shifting shopping patterns
Discounts in department stores around Valentine’s Day meant bargain-conscious sweethearts helped retail sales rise by more than expected in February.
The month-on-month increase of 1.2% from January was notably stronger than the 0.2% forecast, in another sign of the resilience of the UK economy, which came alongside separate numbers showing growth in the service sector.
The retail figures, out this morning from the Office for National Statistics, will give heart to the hawkish interest-rate setters at the Bank of England, who plumped for a quarter-point rise in the cost of borrowing to a 14-year high of 4.25% yesterday.
Optimistic numbers from the private sector also implied that the worst fears over the economy have been overstated. A closely watched, forward-looking purchasing managers’ index pointed to continued growth, led by dominant service industries. S&P Global and CIPS also found new business at service companies hit it highest in a year.
According to the ONS, non-food stores sales volumes rose by 2.4% last month, in part due to “strong sales in discount department stores.” People snapping up cut price purchases helped total non-food store sales rise 2.4%, more than double January’s increase. Department store sales were up by 5.5% and clothing store sales rose by almost 3%.
There was also strong growth in second-hand goods stores, such as auction houses and charity shops, helping the overall volume of non-food sales up 1.7%.
With the high cost of living still a live issue for millions, the ONS also pointed to “some anecdotal evidence of reduced spending in restaurants and on takeaways.”
Danni Hewson, head of financial analysis at stockbroker AJ Bell, said: “You might be forgiven for wondering if Britain really is in the middle of a cost-of-living crisis” when looking at the retail sales figures, but added:
“Pop the hood and the reality is laid bare. Consumers appear to be choosing supermarkets over takeaways and snapping up bargains wherever they can … “People are hunting out bargains whether they’re found in the sales aisles being well stocked by department stores, or in charity shops.
“Purchasing power has been eroded and some retailer’s books clearly show the sector is paying a high price.”
Fewer rail strikes in February appeared in the data. Fuel sales volumes fell by 1.1% in the month, following a rise of 1.1% in January when, the ONS said, service outages “may have increased car travel.”
This week’s interest rate rise underlined the Bank of England’s determination to tame inflation, which unexpectedly rose this week and stuck at 10.4% for February, defying expectations that it would fall under double digits.
Today’s data shows how the UK may be on course to avoid a recession in 2023, but also gives insight into how the high cost of living is reshaping spending patterns on the high street.