Retail sales dip in February as consumers stung by inflation

Tuesday, 26 February 2013 04:24

A survey by the CBI shows that retail sales growth slowed in the first two weeks of February.

The CBI’s distributive trades survey found that 37 per cent of retailers saw an increase in the volume of sales in the year to February, whilst 29 per cent reported a reduction.

The balance of +8 per cent was the lowest figure since September 2012 and was the third consecutive month that the rate of growth has been slowing.

It was well below the expectations of most economists after January saw a figure of +17 per cent reported.

Howard Archer, from forecasters IHS Global Insight said: “How much retail sales bounce back in February from January’s snow-influenced weakness will be important to growth hopes for the first quarter of 2013.”

The fact that it didn’t is bad news for the economy and worrying for hopes that the economy will grow in the first quarter of 2013 and avoid a triple-dip recession.

On Wednesday, the second estimate for GDP from the fourth quarter will be unveiled. The first estimate put the contraction of the UK economy in the final quarter of 2012 at 0.3 per cent.

Analysts said that the drop in retail sales in February was as a result of high inflation which at 2.7 per cent is more than double the low wage settlements of 1.3 per cent that have hit disposable incomes.

Further data from the report points to a continued slowdown. Advance orders fell sharply to record a balance of -19 per cent against analyst expectations that they would remain flat.

Chris Williamson, chief economist Markit, said: "The fact that the CBI survey remains in positive territory gives good reason to believe that sales will rebound to some extent in February. As such, this will help further allay fears of a triple-dip recession, coming on the back of stronger than expected PMI business survey data in January.

"However, it is clear that the retail environment remains tough, and that consumers are unlikely to step up their spending to any significant degree while inflation runs high, pay growth remains weak and job worries proliferate. Retailers are evidently seeing this first hand, causing expectations of sales in the month ahead to deteriorate to the weakest since September."

Mr Archer believes there are some grounds for positivity too, “Consumer confidence rose appreciably in January, while employment was up by a robust 154,000 in the three months to December to reach a record high of 29.730 million,” he said.


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