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Growth in UK retail sales picked up in March after falling to a two-year low in February, according to industry data that points to signs of recovery for the sector on the back of easing price pressures.
The value of retail sales increased at an annual rate of 3.5 per cent last month, up from 1.1 per cent in February, the British Retail Consortium said on Tuesday. March’s reading was above the 12-month average of 2.9 per cent.
Some economists said the figures from the trade body added to recent data showing an easing in cost of living pressures and pointed to an impending rebound in retail sales, as declining inflation boosted consumer demand.
“As inflation comes down, consumers have increased spending power and the ability to buy more things . . . increasing [sales] volumes is the picture of the economy as a whole,” said Rob Wood, chief UK economist at consultancy Pantheon Macroeconomics.
UK shop price inflation fell to its lowest levels in two years last month, according to separate data from the BRC. In February, official consumer price inflation fell more than forecast to 3.4 per cent, the lowest rate since 2021.
Tuesday’s data — released by advisory firm KPMG and the BRC ahead of official retail figures due later this month — showed the surge in sales was largely driven by food purchases. They increased 6.8 per cent in March on the back of stronger sales volumes even as the prices of some staple items have started to moderate.
Sarah Bradbury, chief executive of the Institute of Grocery Distribution, an industry group, said grocers “benefited from Easter falling in March this year”, adding: “This marks the fourth consecutive month of year-on-year volume growth, offering hope to retailers and suppliers.”
But many retail analysts and insiders caution that the industry is still getting back on its feet after two years of high inflation and as poor weather suppressed spending in the first quarter of 2024.
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Separate data from Barclays on Tuesday showed restrained growth in spending, with consumer card spending rising at an annual rate of 1.9 per cent, unchanged from February.
Both Barclays and the BRC showed slow growth in discretionary spending compared with February, with non-essential sales growing annually at 1.6 per cent, according to Barclays, and non-food sales contracting by 1.9 per cent according to BRC, as many families chose to stay at home and avoid the poor weather.
“The wet weather has been a key factor in the slowdown in discretionary spending, as it’s meant fewer visits to the high street and to hospitality venues,” said Karen Johnson, head of retail at Barclays.
Analysts, however, said the improving economic outlook, March’s better retail data and sunnier weather should give retailers hope.
“Economic indicators are heading in the right direction,” said Linda Ellett, UK head of consumer markets at KPMG. “It remains a challenging environment, but as we head into the warmer months, retailers will be hoping that stronger consumer confidence will turn into stronger retail sales.”
