Retail sales remained flat in March, according to the Office for National Statistics (ONS), in a sign that the strength of the consumer might be waning after a strong start to the year.
The latest figures undershot economists’ expectations. Analysts had been expected retail sales volumes to rise 0.3 per cent in March.
Although overall sales volumes were flat, there were substantial changes within different categories.
Fuel sales rose 3.2 per cent with some economists suggesting consumers were more focused on travelling than spending on goods. Non-food store sales also rose 0.5 per cent as better weather enticed consumers onto the high street.
In contrast, sales in food stores and non-store retailers fell 0.7 per cent and 1.5 per cent. “Retailers suggested that increased prices were affecting consumer spending habits,” the ONS said.
“Retail sales registered no growth in March. Hardware stores, furniture shops, petrol stations and clothing stores all reported a rise in sales. However, these gains were offset by falling food sales and in department stores where retailers say higher prices hit trading,” ONS senior statistician Heather Bovill said.
“Looking at the longer-term picture, across the latest three months retail sales increased after a poor Christmas,” Bovill said.
Falls in food and non-store retailing offset by spend on fuel and non-food items
Over the year as a whole, volumes rose 0.8 per cent but remained 1.2 per cent below the pre-pandemic level in February 2020.
A separate survey from Deloitte, released today, showed that although consumer confidence had reached its highest level in two years, this had not yet translated into increased spending, particularly on discretionary items.
“There is still much caution amongst retailers and consumers whose purchasing power was hit hard in the last two years,” Oliver Vernon-Harcourt, head of retail at Deloitte, said.
The figures will be a challenge to economists who hope that the UK economy can kick on in 2024 after recovering from last year’s recession.
But despite this mornings disappointing figures, many economists still argued that the prospects were improving for UK consumers.
Falling inflation and the prospect of Bank of England interest rate cuts has made many analysts optimistic about the UK’s prospects.
Alex Kerr, assistant economist at Capital Economics, pointed out that the “retail recession” was over after volumes grew 1.9 per cent in the first quarter.
“As inflation falls, we still think rising real household incomes will support retail activity throughout 2024,” he said.
Rob Wood, chief UK economist at Pantheon Macroeconomics also argued there were a number of factors which could support household spending in the months to come.
“Real wage growth has improved sharply, the Chancellor’s tax cuts along with benefit increases will boost disposable income 0.8 per cent this year, the MPC is edging to a summer rate cut, and the housing market has returned to life too,” Wood said.