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Modest uptick in UK retail sales in February

Mar 31
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Official figures released for February show there was a modest increase in retail sales volumes, contrasting with the previous significant decline. There was a 2.1 per cent month-on-month increase after the 8.2 per cent decrease seen in January.

While the figures suggest consumers had abandoned some of the caution seen at the beginning of the latest lockdown, robust online sales helped. They were up 4.6 per cent month-on-month and 77.6 per cent year-on-year in terms of value. The online share of total sales now stands at a record level of 36.1 per cent.

Despite the pick up in retail sales only being modest, it does add to the argument that the UK economy saw some improvement in February. It comes after the country’s GDP saw a 2.9 per cent decline in January, which was less than had been forecasted.

Reacting to the latest figures, the EY ITEM Club now believes the GDP contraction for the first quarter could stand at a little over one per cent quarter-on-quarter. As this had previously been expected to come in at around three to four per cent, it shows some improvement.

There’s no doubt that consumers will play a key role during the second quarter and beyond, as the UK tries to recover from the pandemic. The easing of restrictions is likely to see increased activity in the retail sector, as non-essential shops begin to reopen in England from April 12th.

Unemployment is another area that looks like it will rise less than had been expected, after the furlough scheme was extended once again. The EY ITEM Club had previously expected unemployment to peak at seven per cent, but had revised this prediction down to six per cent.

Howard Archer, chief economic advisor to the EY ITEM Club, said: “It is evident that the pandemic-related restrictions on non-essential stores has accelerated an already underlying trend for online sales rising.

“The annual retail sales deflator fell 0.6 per cent year-on-year in February, with fuel prices down 3.2 per cent year-on-year. Excluding fuel prices, the annual retail sales deflator was down 0.4 per cent year-on-year in February.”

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