Shops’ record worst performance in nine months

THE embattled retail sector has taken a further hit, with official data revealing its worst performance in nine months in February – coupled with a late downgrade of January’s unexpectedly positive figures.

The Office for National Statistics (ONS) said yesterday that the estimated 0.9 per cent rise in retail sales volumes heralded in January was over-optimistic, dropping the figure to an increase of only 0.3 per cent.

And in February, the amount of goods sold fell by 0.8 per cent – more than forecasts had predicted – driven by a weak show from the clothing and household goods sectors.

Experts warned the figures cast doubts on hopes that the UK economy would show a robust return to growth in the near future – as household spending remains squeezed and consumer confidence lies at rock bottom amid fears of rising unemployment and increased duty on fuel.

• View the the full ONS report on The Steamie

“The data puts a real dent in hopes that the consumer may be perking up appreciably and tempers hopes that GDP will see a relatively decent return to growth in the first quarter after the 0.2 per cent contraction in GDP suffered in the fourth quarter of 2011,” said Howard Archer, UK chief economist for IHS Global Insight.

The tax and spending watchdog, the Office for Budget Responsibility, on Thursday forecast growth of 0.8 per cent for the whole year, slightly higher than its last estimate of 0.7 per cent.

January’s rise had initially given some hope of a boost to the overall economy from the retail sector at the start of the year, but late survey results submitted by smaller retailers drove the final figures lower. “Total sales growth is still below inflation, so overall customers are cutting back on purchases,” said British Retail Consortium director-general, Stephen Robertson.

“Food picked up but non-food sales deteriorated with goods affected by the slow housing market among those particularly struggling.”

A recent fall in inflation from above 5 per cent slowed in February, leaving consumers reluctant to spend.

“Rapid falls in inflationary pressure slowed in February, dampening consumers’ hopes of seeing their spending power rise,” said Daniel Solomon, economist at the Centre for Economics and Business Research.

Annual consumer price inflation fell by 0.6 percentage points between December 2011 and January 2012, but fell by only 0.2 percentage points between January and February 2012.

Mr Solomon added: “Rising unemployment, stubbornly high oil prices and the remaining risks associated with a possible eurozone break-up may also be making consumers less willing to spend.”

A total £24.6 billion was spent in the retail sector last month, compared with £24.4bn in January and £23.9bn the previous year, the ONS said.

Food stores saw sales volumes drop 0.1 per cent between January and February, despite customers stocking up on cupboard staples during snowfalls and freezing temperatures at the beginning of the month.

Non-food stores slumped 1.5 per cent month-on-month, driven by a 1.2 per cent drop in clothing and footwear sales.

The decline came despite continued evidence of heavy discounting among retailers.

The “other stores” sector, which covers a range of products from carpets to rugs and toiletries to watches, fell 3 per cent.

The ONS identified within that sub-sector particularly steep declines in specialised stores such as fine art dealers and antiques retailers.

Only non-store sellers – such as mail-order and internet stores – enjoyed success last month, the data revealed – showing year-on-year sales volume growth of 9.2 per cent.

Internet sales accounted for 10.7 per cent of all retail sales in February, down from the January peak of 11.9 per cent.