Keep calm and carry on? Best not – panic’s actually good for economy

Figures from the Office for National Statistics show retail sales rose 1.8 per cent in March, well ahead of analysts’ expectations after a 0.8 per cent drop in February.

However, retail bodies say the rise was partly driven by panic buying of fuel, with a 4.9 per cent increase in sales at petrol stations, the highest March rise since records began.

Meanwhile, garden centres and clothes retailers say that shoppers have been inspired to buy their summer clothes and garden furniture by last month’s heatwave.

The strength of the retail market in March may be enough to ensure Britain does not return to recession when figures for the first three months of 2012 come out next week.

David Kern, chief economist at the British Chambers of Commerce (BCC), said: “An increase in retail sales in March was expected after the recent temporary fall, but this rise was well above analysts’ predictions.

“We shouldn’t over-analyse one month’s figures, but this news reinforces hopes that GDP will show positive growth in the first quarter, and that the UK avoided a technical recession.

“While a positive GDP figure will help maintain business confidence, we mustn’t be complacent. Economic growth in the UK is still too weak and businesses must be empowered to drive the recovery – especially at a time when the public sector is shrinking.”

There are also concerns that an unseasonally warm March simply brought forward spending, which otherwise would have happened in later months.

Richard Dodd, of the Scottish Retail Consortium, said: “March was a good month, but the boost to sales came predominantly from people going out and buying things in preparation for summer.

“The increase in figures comes from a rise in summer fashion and garden goods, rather than from our customers’ sense of optimism about their ability to spend.

“Scottish retailing has been having a difficult time for a long time now,” he said. “The fear is that these are sales that have just been brought forward and that will not happen in April or May.”

Chris Williamson, chief economist at Markit, added: “We should not get too excited about these numbers, as they do not herald a consumer revival.

“Much of the increase in March sales was attributable to better weather, meaning people brought forward their purchases of summer clothing and other seasonal items, such as garden furniture.

“This, therefore, suggests that sales in April will be weaker than usual. Panic buying also drove fuel sales up 4.5 per cent on last year.

The underlying trend in sales is therefore likely to be only modest.”

Economists do not expect a resurgence in consumer confidence. Howard Archer, of Global Insight, said: “The retail sales data brought some excellent news for the UK economy and support belief that the economy is seeing modest underlying expansion, whether or not reported recent major weakness in construction output stopped GDP returning to growth in the first quarter.

“Nevertheless, consumers still face significant pressures.”