British retail sales hit a standstill in March despite recent inflation easing, marking the first time they’ve remained stagnant in monthly terms since December, according to the latest report from the Office for National Statistics (ONS).
Economists had anticipated a modest uptick in sales volumes by 0.3% for the month. However, the ONS revealed that sales volumes showed no growth following a marginal 0.1% rise in February, catching many experts off guard.
The report highlights contrasting trends within the retail sector. While automotive fuel sales surged to their highest levels since May 2022 and non-food store sales saw an uptick, declines were recorded in food stores and online retailers. Excluding fuel sales, overall sales volumes dipped by 0.3% for the month.
Nicholas Hyett, Investment Manager at Wealth Club, commented: “Retailers had a gloomier March than many expected, and overall sales remain 1.2% below their pre-covid peak.
Department stores remain an area of particular weakness, not good news for John Lewis which announced it would not be paying its regular staff bonus for the second year in a row during the month. However, high street shops more broadly have actually performed better, it’s food retail and online shopping that have held back growth.
The disappointing numbers will fuel speculation that the Bank of England will consider interest rate cuts this summer, though are not poor enough to necessitate a move. It leaves the UK a little limbo once more.”
Meanwhile, in a bid to bolster consumer sentiment ahead of an anticipated election, Finance Minister Jeremy Hunt introduced a second social security tax cut in April, following the initial cut in January.
Despite the overall subdued performance, there are glimmers of optimism from leading UK retailers. Tesco, and clothing retailer Next both reported an improving consumer outlook, forecasting profit growth for the year.
However, the impact of the retail sales figures was felt in the currency market, with sterling briefly dipping against the U.S. dollar and the euro upon publication of the data.
The ONS data, contrasting with some business surveys indicating a pick-up in March retail sales, reveals a 0.8% increase in sales volumes compared to a year ago, with a notable 1.9% rise from the previous three months, marking the most significant increase since mid-2021, buoyed by a surge in January sales.
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