UK retail sales fall less than forecast in February, ONS reveals

UK retail sales fell in February as cold weather delayed the purchases of spring and summer attire, the Office for National Statistics revealed on Thursday.

Sales dropped 0.4% month-on-month in February, beating forecasts for a 1.0% decrease, after rising the most in more than two years in January.

“Shoppers tend to be tight-fisted after the January sales, but deeper concerns surrounding a possible Brexit might be making them think twice before spending,” said Dennis de Jong, managing director at UFX.com.

“One silver lining will be George Osborne’s proposed overhaul of the business rates system announced during last week’s Budget, which has the potential to bring small retailers some much-needed relief. Whether that entices consumers back to the high street is another matter.”

However, compared to the same month a year ago retail sales jumped 3.8% in February, surpassing estimates for a 3.5% gain, as low inflation and an increase in employment supported consumer spending.

Chris Williamson, chief economist of Markit, said rather than being driven by low prices, the Bank of England would like to see rising demand that allows retailers to push up prices to a greater extent. The BoE is targeting 2% inflation but data on Tuesday showed the consumer price index was unchanged at 0.3% in February.

Williamson added there were increasing signs that households are growing concerned about incomes, which could weigh on spending in the coming months. "Despite news of record high employment, pay growth remains disappointingly meagre," he said.

Excluding fuel, retail sales declined 0.2% in February from a month ago but surged 4.1% on the year. Analysts had pencilled in a 1.0% fall on the month and a 3.4% rise on the year, excluding fuel.

In the three months through February, total sales rose 0.8% but clothing dropped 3.4%, the most since 1990.