Retail sales rise puts economy back on track for growth

Britain’s economy is on track to return to growth in the first three months of the year after a jump in retail sales and signs of sustained activity in the private sector this month.

New business booked by service sector companies rose at the sharpest pace for 12 months in March, amid rising confidence among firms and resilient consumer demand.

Economists said the latest snapshot

from the closely watched purchasing managers’ index suggested the economy would grow by about 0.2% in the first quarter of the year. It comes after UK gross domestic product (GDP) flatlined in the final quarter of 2022.

“This represents a welcome expansion compared to the lack of growth seen in the second half of last year,” said Chris Williamson, the chief business economist of S&P Global Market Intelligence, which produces the figures with the Chartered Institute of Procurement and Supply. “The improvement in order book growth adds to signs that a near-term recession has been avoided.”

Official figures showed a betterthan-expected boost for retail sales in Great Britain in February, as shoppers turned to discount department stores and secondhand shops, and chose to dine in more and cut back on visits to pubs and restaurants.

The Office for National Statistics (ONS) said retail sales increased by 1.2% last month compared with January, well ahead of economists’ forecasts of a 0.2% rise, bouncing back to pre-pandemic levels despite the cost of living crisis.

“The UK is finding its shopping habit hard to kick,” said Nicholas Hyett, an investment analyst at Wealth Club. “Retail sales volumes have come in stronger than expected for the second month this year.”

However, the ONS, which also upgraded the sales boost reported for January from 0.5% to 0.9%, said that despite two months of sales rises, volumes were down 3.5% compared with February last year and 0.3% down quarter on quarter.

Sales in February were boosted by a 2.4% increase in non-food store sales, which includes department, clothing, household and other nonfood stores, well up on the 1% rise reported in January.

The increase in overall non-food store sales was driven by a 5.5% rise in department stores and 2.9% in clothing stores, fuelled by strong sales at discount stores. There was also a 1.7% month-on-month boost in sales at secondhand goods stores including auction houses and charity shops.

The other main contributor to overall sales growth in February was a 0.9% rise in food store sales volumes, despite stubbornly high food and drink prices, a significant increase on the 0.1% rise in January. The ONS said this could be down to consumers choosing to eat more at home rather than going to pubs and restaurants.

“There’s clear evidence that shoppers are being careful with their money,” Hyett said.