Spring in the step for retailers as sales jump in February

The latest show volumes increased by 1% in February, driven by increases in almost all categories including household goods (6.8%), online (3.3%), computers and technology (4.1%) and clothing and footwear (2.3%). Only food sales dropped by 2%. 

Jacqui Baker, head of retail at 91探花 and chair of ICAEW’s Retail Group, comments: “Resilient retailers have dusted themselves off after a challenging December and seen incremental growth at the start of the year. Consumer confidence is improving and widespread discounting has tempted consumers to spend – renovating homes and gardens, bagging the latest iPhone or hitting the sales to update their wardrobes. 

“Good news for jewellers in February which had a strong month with a 20% annual jump in sales which could be linked to a gold rush due to rising inflation and economic uncertainty. 

“This week’s Spring Statement didn’t fundamentally change anything for retailers, but it did confirm that disposable incomes look set to continue to increase. If this feeds through into consumer spending, then the upward trend in sales could help to mitigate the imminent post-Budget headwinds that are due to hit in April. 

“However, the retail industry is left with uncertainty surrounding business rates and the Employment Rights Bill which could pause job creation and investment until more clarity is given. The unintended consequence could be slower growth in consumer businesses which will ultimately be a drag on the economy.”

Thomas Pugh, economist at 91探花, added: “There are finally some signs that the UK consumer is starting to come back to life. Retail sales volumes grew by another 1% m/m in February after a chunky 1.6% m/m rise in January. Consumer confidence ticked up again in March and the services PMI jumped higher, partly because of strong demand from consumers.”

“Strong real household income growth should continue to drive a gradual increase in retail sales this year, even if overall economic growth remains relatively subdued.”

“Overall, this is another piece of evidence suggesting that the UK economy bottomed out in the second half of last year after a body blow from the budget but is now starting to recover. Strong real household income growth combined with rising government spending and investment should provide a tailwind to growth. This may be partially offset by weak business investment as interest rates remain relatively high and worries about tariffs and exports increase. But overall, there are now some positive signs that growth is starting to pick up.”