Retail sales in Britain fell unexpectedly last month, posting a 0.5% decline, against City expectations of a 0.4% increase. A 6.2% fall in petrol sales was the main culprit. Here is what economists made of the numbers.
Allan Monks at JP Morgan
While there has been a clear slowing from the 9% gains recorded for the fourth quarter, that pace never looked sustainable. The ongoing monthly gains in underlying sales following that quarter are encouraging. Heavy discounting (even after excluding auto fuels) in the retail sector is helping to underpin real spending gains, with scope for further increases to come.
Philip Shaw, chief economist at Investec
We are not at all concerned by this apparent slowdown in high street activity as the retail sales series has been exceptionally buoyant in recent months. Even after today’s figures, headline sales volumes stand 4.2% above year ago levels and 3.0% higher than where the index stood six months ago.
The latest figures seem to represent a modest break from the relentless surge in sales since last autumn and are not likely to represent a turning point. Indeed at least for now fundamentals remain very supportive with employment rising strongly, pay growth beginning to firm, consumer confidence high and inflation currently at zero. Our suspicion is that household spending will probably play a more significant role in economic growth further ahead than in the earlier phases of the recovery, although this again might be subject to political developments after 7 May.
John Hawksworth, chief economist at PricewaterhouseCoopers
The retail figures out this morning were somewhat weaker than expected in March (though weighed down by a sharp fall in petrol sales). The underlying trend for the first quarter was still positive (0.9% volume growth relative to the previous quarter), though not as fast as the average growth rate seen in some earlier quarters in 2014. This suggests consumers are still a little cautious, despite the strong fundamentals around jobs growth and low inflation.
The figures also confirmed continued strong deflationary pressures on the high street. Even excluding petrol, the implied retail sales deflator was around -2% in the year to Q1 2015, well below overall consumer price inflation of around zero. This reflects the fact that goods prices have been falling, while services prices have generally still been rising.
Mike Jervis, retail specialist at PwC
Despite the unexpected fall in last month’s retail sales figures, our April consumer outlook survey found that consumers are more confident than they’ve been since before the 2008 financial crisis – and for the first time, the balance of opinion is positive for the country as a whole driven by the benefits of low unemployment, low inflation and rising real wages. There is no hint of a pre-election wobble, either.
David Kern, chief economist at the British Chambers of Commerce
After strong growth in February, it is not surprising to see a slowdown in retail sales in March. In fact, if you remove the fall in petrol station sales, overall sales rose slightly in March. The underlying trend for the retail sector remains positive, with sales in the first three months of 2015 up by almost 5%.
While it is positive to see the retail sector performing well, the UK economy still relies far too heavily on consumer spending, and the contribution of exports and investment remain too low. The next government has to address this as a priority. We need to start a revolution in how we export if we are to see sustainable economic growth.
Howard Archer, chief UK and European economist at IHS Global Insight
Retail sales volumes still grew by a very decent 0.9% quarter-on-quarter in the first quarter of 2015, suggesting that consumer spending made a solid contribution to GDP growth.
Even so, we suspect that GDP growth slowed to 0.5% quarter-on-quarter in the first quarter of 2015, which would be down from 0.6% in both the fourth and third quarters of 2014, 0.8% in the second quarter and 0.9% in the first. Concern that GDP growth could have slowed appreciably in the first quarter of 2015 has been fuelled by disappointing industrial production and (especially) construction output data for February as well as weaker trade data.
Alan Clarke, economist at Scotiabank
Ouch! Not good news for Q1 GDP next week. To be clear, this is far from a disaster. Look at the year-on-year growth rate of circa 5%. That pace of growth is consistent with robust real incomes growth. No need to panic.
Nonetheless, at the geeky level, this release is important given what it implies for first-quarter GDP. Yesterday’s MPC minutes played down the weakness of the monthly data that feed into Q1 GDP - I think that was a mistake. Retail sales were really really strong in Q4, and weak in Q1.
Overall, disappointing. It may well be that consumers maxed out before Christmas in a discount-fuelled frenzy and the post-Christmas period is experiencing a pause for breath. The monthly data all point towards sluggish Q1 GDP next Tuesday, not the sort of reading that the coalition government will be hoping for.
