FILE PHOTO: People shop on Oxford Street in London, Britain April 10, 2023. REUTERS/Anna Gordon
LONDON (Reuters) -British retail sales fell by a greater-than-expected 0.9% in March from February, official figures showed on Friday, with bad weather and high inflation combining to keep consumers away from the shops.
Economists polled by Reuters had forecast that sales volumes would fall by a monthly 0.5% after rising in January and February.
Darren Morgan, director of economics at the Office for National Statistics, said the broader trend for retail sales was less subdued than the figures for March alone suggested.
“A strong performance from retailers in January and February means the three-month picture shows positive growth for the first time since August 2021,” he said.
The sixth-wettest March in records dating back to 1836 hit clothing retailers and garden centres while food store sales fell as consumers continued to be hit by climbing prices. Retail sales volumes in March were 3.1% lower than a year earlier.
Data published on Wednesday showed a 19.1% rise in food and drink prices in the 12 months to March, the biggest increase since 1977.
British consumers have been squeezed by an overall inflation rate which hit a 41-year high of 11.1% in October and has remained in double digits since, including March’s stronger-than-expected reading of 10.1%.
The Bank of England – which is grappling which how much further it needs to raise interest rates – and most private economists expect inflation to fall quickly over the coming months as last year’s surge in energy prices drops out of the annual comparison.
A survey published earlier on Friday showed a jump in optimism levels among consumers who were more willing to make expensive purchases.
Paul Dales, chief UK economist with consultancy Capital Economics, said the survey by polling firm GfK suggested a brighter picture than the rain-affected March sales data.
“That said, even though the worst of the declines in retail sales are in the past, higher interest rates will restrain spending this year,” he said.
The BoE is expected to raise interest rates for the 12th consecutive meeting in May, taking Bank Rate to 4.5% from its current level of 4.25%.