UK retail sales fell more than forecast in March as wet weather doused spending and consumers retrenched after splashing the cash over the previous two months.
(Bloomberg) — UK retail sales fell more than forecast in March as wet weather doused spending and consumers retrenched after splashing the cash over the previous two months.
The volume of goods sold in stores and online dropped 0.9% from February, the Office for National Statistics said Friday. Sales excluding auto fuel declined 1%. Economists had expected falls of 0.5% and 0.6%, respectively.
With household spending proving surprisingly resilient this year, the pullback last month is a reminder of the continuing pressures on family budgets. Double-digit inflation is still far outstripping wage growth, and interest rates have risen sharply, with further increases expected this year.
“Poor weather impacted on sales across almost all sectors,” said Darren Morgan, ONS director of economic statistics. “Food store sales also slipped, with retailer feedback suggesting the increased cost of living and climbing food prices are continuing to affect consumer spending.”
The setback in sales comes despite a dramatic improvement in household confidence since slumping to a record low last autumn. GfK’s consumer confidence index jumped in April to its highest level since February 2022, just before Russia’s invasion of Ukraine sent living costs in Britain rocketing. It rose six points to minus 30, the third consecutive increase.
Department stores and clothing retailers saw their sales dampened by the heaviest rainfall in England and Wales for over 40 years, suffering a 3.2% and 1.7% month-on-month fall respectively, the ONS said. Overall non-food sales dropped 1.3%.
Food Shortages
Gaps on the supermarket shelves may have also dragged on the sector with shoppers suffering from shortages of vegetables due to bad weather abroad. Food store sales slipped 0.7% following a rise in February.
Fashion and homeware company Next Plc, considered a bellwether among British retailers, last month warned of a “challenging” year ahead and said profit and sales will probably decline. Retailers are among the worst-performing shares over the past month, gaining just 2% compared with a 6% rise in the broader FTSE 350 index.
Despite the setback in March, the strength of sales in January and February was enough to deliver a 0.6% gain in the first quarter
That was the first three-month increase in sales since August 2021, when the economy was bouncing back from Covid-19 restrictions. It was the first gain in a calendar quarter since the period through June of the same year.
The GfK figures released on Friday found that households were becoming more willing to spend on big ticket items and far more optimistic on the outlook for their finances and the economy.
“Even though the worst of the declines in retail sales are in the past, higher interest rates will restrain spending this year,” said Paul Dales, chief UK economist at Capital Economics.
“March probably isn’t as bad as it looks as it was partly due to the unusually wet weather. The further rise in consumer confidence in April paints a much sunnier picture.”
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