Retail sales jumped in February on strong buying at discount stores in the face of a cost-of-living crisis, official data showed Friday.
Sales by volume increased 1.2 per cent last month, the Office for National Statistics said in a statement.
"In the latest month, discount department stores performed strongly with food shops also doing well as consumers, confronted with cost-of-living pressures, cut back on eating out or purchasing takeaways," noted ONS director of economic statistics, Darren Morgan.
Separately Friday, research group GfK said there had been a slight lift this month in consumer confidence among Britons.
Its Consumer Confidence Index increased two points in March.
At the same time, "the cost-of-living crisis remains a stark reality for most", said GfK client strategy director, Joe Staton.
Further data Friday showed growth in the UK private sector appears to have slowed in March after hitting an eight-month high in February.
The S&P Global/CIPS flash UK purchasing managers' index dipped to 52.2 in March, from 53.1 a month earlier.
Bank of England (BoE) Governor Andrew Bailey on Thursday voiced optimism that the UK would avoid recession this year.
The forecast was less certain than one provided by the government a week ago when it said the country would avoid recession in 2023.
But that was before official data this week revealed an unexpected jump in UK annual inflation to 10.4 percent in February, from 10.1 percent the previous month.
The surprise increase pushed the BoE to raise its key interest rate once more on Thursday to 4.25 per cent, the highest level since the 2008 global financial crisis.
The BoE joined the Federal Reserve and Swiss central bank in hiking borrowing costs this week despite a fresh banking crisis which was spreading Friday as shares prices in major European lenders plunged.
It came as Bailey told the BBC he does "not see signs of stress in the UK banking system".
"We subject the banks in the UK to regular stress exercises - and a key part of those stress exercises is very rapid and substantial increases in interest rates - to test their resilience," he added.
'Chink of light'
Commenting on the retail sales data, Nicholas Hyett, investment analyst at Wealth Club, said the there's clear evidence that shoppers are being careful with their money, despite two consecutive months of strong sales.
“Growth in non-food sales was driven by discounters and second-hand shops, while the rise in food volumes is attributed to people choosing to eat in and avoid pricey meals out. Shoppers may be more willing to spend, but only when there's a bargain to be had,” he noted.
“Longer term, sales volumes remain lower than they were this time last year. With the Bank of England expecting the UK economy to hold up better than previously expected, that provides room for several months more sales growth. Whether shoppers find the confidence to return to the mid-market space though remains to be seen.”
Jacqui Baker, head of retail at RSM UK and chair of ICAEW’s Retail Group, shared the optimism on the longer-term forecasts for the economy.
“As retailers look forward on their sales calendar, consumers will be wanting to enjoy the longer days, with Easter and three bank holidays in May there’s a chink of light to boost sales,” Baker said.
Thomas Pugh, economist at RSM UK, added: “Strong growth in retail sales in February, and the positive revision to January, paints a more resilient picture of the economy at the start of the year and probably reduces the chances of the economy slipping into recession.
“Of course, increases in food sales could reflect consumers substituting spending in restaurants in favour of home cooking. So, it doesn’t necessarily point to stronger overall GDP growth. What’s more, we expect households’ total disposable incomes to continue to fall in Q1 and Q2 this year – meaning that spending is likely to be constrained in the first half of this year.
“However, the strong growth in more discretionary categories such as department stores and clothing, combined with another uptick in consumer confidence, suggests that consumers are becoming more willing to go out and spend. Given households’ balance sheets are still generally strong, there is room for consumers to save less and borrow more to supplement spending. Indeed, the main factor that will determine if the UK falls into recession or avoids it will be the willingness of consumers to go out and spend.”
Simon Hannah
