Retail sales continue a strong start to 2014
Retail sales volumes recorded robust year-on-year growth of 3.7% in February 2014 according to the Office for National Statistics (ONS). This was the third consecutive month of above 2.0% annual growth for retailers, building on the 4.3% over the year to January 2013.
In February 2014, three out of the four main retail sectors, food stores, non-food stores, and non-store retailing saw an increase in the quantity bought whereas the fourth sector, petrol stations, saw a fall of 1.5% year-on-year in February 2014. The best performer was non-store retailing, where sales volumes rose by 20.1% over the year, in comparison to 13.0% recorded in the year to January. There was an especially strong performance by online sales specifically, where the amount spent online increased by 12.4% over the past 12 months.
The robust performance in these sectors may have been supported by deflation in non-food stores overall of 0.4% year-on-year in February with department stores in particular recording a 1.1% price deflation over the 12 months. Easing price pressures in the retail sector, alongside accelerating pay growth and a general downward trend in unemployment may be helping to support consumers’ willingness to spend.
Overall, strong retail sales data in February, which importantly built on robust performance seen in January and December, are likely to continue supporting UK economic growth for the rest of 2014. The gap between consumer price inflation and earnings growth is narrowing, signalling a likely return to positive real wage growth in 2014 which should help further bolster retail sales. Moreover, a further rise in the Cebr/YouGov Consumer Confidence Index to 111.6 for March 2014, its highest level since August 2007, was seen this morning and reinforces the expectation that retail sales will continue on a positive trend.
Christopher Evans
Economist
