Drop in fuel purchases weakens March UK retail sales

Δημοσιεύθηκε: 23 Απριλίου 2015 - 11:19

UK retail sales fell unexpectedly in March, raising questions about how strong next week's first-quarter growth figures will be.

Consumer spending fell 0.5 per cent last month, compared with a revised 0.6 per cent increase in February and well below analysts' expectations. Fuel sales volumes dropped 6.2 per cent after recent increases, while volumes of all other goods rose 0.2 per cent.

Thursday's data show growth at the start of the year was probably slower than economists had anticipated, although they predict a pick-up in the coming months. Estimates for first-quarter gross domestic product will be released on Tuesday, a week before the May 7 general election.

"The monthly data all point towards sluggish Q1 GDP [growth] on Tuesday, not the sort of reading that the coalition government will be hoping for," said Alan Clarke at Scotiabank.

Analysts were initially expecting a reading of about 0.6 per cent - in line with the final quarter of last year - because of the effect of falling oil prices on consumer spending. However, many now believe growth could be as low as 0.4 per cent.

"[The weakness in retail sales] also provides further evidence that economic activity in Q1 has perhaps not been as pumped up by the oil price fall as might initially have been hoped," said Simon Wells, chief UK economist at HSBC.

Consumer spending has been the main driver of economic growth since the start of the year, as shoppers benefited from the steep fall in inflation which hit zero in March. However, economic activity elsewhere has been disappointing, with services, construction and industrial production growing less or shrinking faster than expected.

Retail sales were still up 4.2 per cent on a year ago and by 0.9 per cent on a quarterly basis. Analysts expect the surge in consumer spending to continue in the coming months following record-low inflation and a strong labour market.

"Despite March's weaker-than-expected performance, the prospects for retail sales and consumer spending look bright, as purchasing power has strengthened and should continue to do so," said Howard Archer, chief European and UK economist at IHS Global Insight.

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> Vicky Redwood, chief UK economist at Capital Economics, said: "The fall [in retail sales] was driven by a drop in petrol sales, presumably reflecting drivers having already filled their tanks when petrol prices were at their low in February."

"Looking ahead, the outlook for retail spending remains strong given that wages are rising, jobs growth is strong and consumer confidence is high."

Separate data from the Council of Mortgage Lenders, a trade body, showed that lending picked up in March after a sluggish start to the year.

Gross mortgage lending fell 12 per cent to £44.9bn between the last quarter of 2014 and the first quarter of 2015. However, lending rose in March, increasing 6.9 per cent on a yearly basis to £16.5bn,

"Sentiment and activity are showing early signs of improvement," said Bob Pannell, chief economist at the CML. "We expect to see lending strengthen over the next few months, albeit from a relatively sluggish start in 2015".

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