UK retail sales show unexpected rise as economy gathers pace

UK retail sales unexpectedly rose in March as warm weather boosted spending on spring clothing, adding to evidence the economy gained momentum in the first quarter.

Sales including auto fuel gained 0.1 per cent from February, when they increased 1.3 per cent, the Office for National Statistics said today in London.

That compared with a forecast for a decline of 0.4 per cent, according to the median estimate in a Bloomberg News survey.

Consumers led Britain’s recovery in 2013 and are set to bolster growth again this year as wage growth picks up and inflation slows, easing a five-year squeeze on living standards.

In a sign that sales grew this month, the Confederation of British Industry said yesterday its retail-sales index rose to 30 from 13 in March.

Today's figures "bode well for another strong quarter of GDP," said Christian Schulz, senior economist at Berenberg Bank in London.

“With more people in jobs, wage growth returning and inflation coming down, the squeeze on real incomes has ended. Households need to dip less into their savings to spend, making the upturn more sustainable.”

In the first quarter, retail sales rose 0.8 per cent compared with 0.6 per cent growth in the fourth quarter, the ONS said. It will publish gross domestic product data for the period next week, which the Bank of England forecasts will show economic growth of about 1 percent, the fastest in four years.

Retail output accounts for 5.7 per cent of GDP. Retail sales rose 4.2 per cent in March from a year earlier.

Excluding auto fuel, sales fell 0.4 per cent on the month and were up 4.2 per cent from a year earlier. Food sales dropped 1.4 per cent in March from February. Non- food sales rose 0.9 per cent, led by a 3.1 percent increase in clothing, the biggest monthly gain since April 2011. Warm weather spurred demand for spring and summer fashion ranges, according to the ONS.

A recovering housing market helped lift sales of household goods by 0.4 per cent. Sales of auto fuel increased 4.8 per cent. From a year earlier, non-food sales jumped 9.6 per cent, the biggest increase since April 2002.

The surge reflected weak sales the year before, the second-coldest March on record. The ONS said retail prices measured by the deflator, a measure of changes in shop prices, fell 0.5 per cent in March from a year earlier.

Marks and Spencer reported on April 10 that while its clothing unit had its best performance in three years in the quarter through March, it offered deeper discounts than anticipated.