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UK retail sales registered only a modest rise last month and failed to keep pace with inflation, as bad weather and “cautious” consumers hit spending.
The value of retail sales increased at an annual rate of 1.1 per cent in February, below the 2.4 per cent average of the previous three months, according to the British Retail Consortium.
Non-food sales registered zero growth in February compared with the same month in 2024, data published by the trade body showed on Friday, below 2.5 per cent average annual growth in the previous three months.
BRC chief executive Helen Dickinson said retail sales “saw more modest growth in February”, with fashion performing “poorly due to the gloomy weather throughout the month”.
But she added that retailers were “hopeful the early March sunshine kick-starts spending on spring and summer wardrobes”.
The value of sales growth, collected by the BRC with consultancy KPMG, was also well below the rate of inflation, which rose more than expected to 3 per cent in January.
This indicates that consumers continued to cut the volume of goods they purchased as they have done throughout most of the cost of living crisis.
Linda Ellett, UK head of consumer, retail and leisure at KPMG, said: “Consumers remain cautious with their spending and many are continuing to prioritise saving, travel and experiences.
“Nervousness about the economy is deferring other big ticket purchasing, but occasions and offers are still tempting shoppers into some impulsive spending,” she added.
The economy grew only marginally in the second half of 2024, and employers have in recent months warned about job cuts following rises in the minimum wage and national insurance contributions. Announced in the autumn Budget, the increases will take effect in April.
The BRC data chimes with figures from Barclays, which on Tuesday reported that consumer spending rose at an annual rate of 1 per cent last month. This is down from 1.9 per cent in January and also well below the rate of inflation.
Barclays said spending on electronics bucked the trend, with growth of 6.7 per cent in February, citing “upgrades to home-entertainment” products bought between 2020 and 2021 and new product launches as possible contributors.
However, most other categories, including supermarkets, sports and outdoor, and bars and pubs, reported outright contractions.
The BRC and Barclaycard data add to evidence that low consumer confidence and concerns about the labour market are hitting household spending and economic growth. This is despite official figures showing that wages have outpaced inflation since mid-2023.
Whether weak economic growth is the result of poor demand — which lessens underlying price pressures — or supply issues is a key question for the Bank of England as it weighs the future path of interest rates.
BoE governor Andrew Bailey last week played down the risks of a self-reinforcing acceleration in price growth. “The demand weakness argument may be getting a bit stronger relative to last year,” he told MPs.
Dickinson said the latest BRC data would leave many retailers “uneasy” as they braced for £7bn of new costs from the Budget and packaging levies in 2025.
“The industry is already doing all it can to absorb existing costs, but they will be left with little choice but to increase prices or reduce investment in jobs and shops, or both,” she added.
