Retailers suffered last month as the new year rebound in high street sales failed to last, industry figures published today will show.
Retail sales by value rose by only 1.1 per cent in February, compared with a 4.3 per cent rise in January and the lowest growth in nearly a year, according to British Retail Consortium data.
The figures, which include the impact of the rise in VAT to 20 per cent in January, will dent hopes of a strong bounceback in the economy in the first quarter of this year.
Mervyn King, the Governor of the Bank of England, has already warned this year that households are suffering the most sustained drop in their real wages in 90 years.
Analysts said that weaker spending could strengthen the arguments for the Bank of England to keep interest rates at the record low of 0.5 per cent. But many believe that the Bank will move to tackle rising inflation by lifting rates by a quarter-point in the coming months.
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Helen Dickinson, the head of retail at KPMG, said: “There is inflation in these numbers, so volumes are lower and, with people making less shopping trips, fewer retailers are benefiting from the limited spending capacity available ... Consumers are re-adjusting their spending habits to reflect the reduced disposable income in their pockets and the key question for retailers is whether they have finished yet.”
Stephen Robertson, the director-general of the British Retail Consortium, which produced the data, said: “After the big boost to January’s figures from one-off factors, including a strong final burst of pre-VAT rise spending, February’s figures are a return to a more realistic picture of how things are for customers and retailers. Against this background of deteriorating sales, the BRC has written to the Chancellor urging him to use his Budget to support retail’s essential contribution to jobs and growth by avoiding new burdens and removing existing ones.”
Food sales held up during the month, helped by a surge in spending on food items around Valentine’s Day. The BRC said that supermarket “meal deals” were popular with couples marking the occasion, which also boosted in sales of champagne, confectionery, wines and spirits. Total food sales rose by 3.6 per cent in the three months to February, and climbed by 1 per cent on a like-for-like basis. Experts said that supermarkets would be hoping that Easter and the royal wedding, both in April, would provide a boost for sales.
Non-food sales slowed markedly last month, the BRC said, rising by 1.3 per cent between December and February and by only 0.1 per cent on a like-for-like basis with more expensive goods such as electricals and furniture suffering.
Sales of women’s clothing also suffered last month, the BRC added, although children’s clothing sales helped to offset this decline due to the half-term holiday.