The increased level of uncertainty about the outlook for UK economic growth and slightly deteriorating financial morale among UK households could be behind an expected slowdown in retail sales volumes in February.
London - UK retail sales volumes surged above estimates in January, bouncing back significantly from the preceding month. January saw growth in all sectors, with the biggest drivers coming from clothing and footwear.
Low inflation and aggressive price promotions among major high-street retailers have been helping boost sales recently.
The expectations for the February sales performance though point to a deceleration again. Economists expect sales volumes excluding fuel declined 1% between January and February, down from a surge of 2.3% a month before. Total sales are seen falling 0.7% from a rise of 2.3% in January. The UK Office for National Statistics is releasing February figures on Thursday.
The most recent surveys published by Markit Economics showed consumers' financial situation brightened slightly in February only to slip down again in March, while the headline index measuring financial morale remained in contraction territory. Both the February and March surveys by Markit showed that households' perceptions of low inflation remained among the primary factors leading to lower pressure on consumers' budgets.
Consumer price inflation in UK remained unchanged at 0.3% in February despite estimates of a slight increase. Price growth in Britain is expected to remain muted all throughout this year. The Bank of England sees annual rate of the CPI crawling up to reach 1% as late as at the end of 2016. The Office for Budget Responsibility, the UK's fiscal and economic watchdog, recently slashed its outlook for inflation, expecting CPI at just 0.7% by the end of the year.
Retail sales, and overall consumer spending, remains the UK's main economic driver on the expenditure side of GDP. The majority of economists expect this segment to continue supporting growth in the short term while the central bank maintains ultra low interest rate policy.
In the US for example, the worse-than-expected retail sales led major banks to revise down their GDP forecast. Barclays (LON:BARC) considerably lowered its prediction for US economic growth for the first quarter, following disappointing official retail sales data for both February and January. The bank trimmed its outlook for the first-quarter growth by a full fifty basis points to 1.9% growth, steeply down from the previously expected 2.4% rise.
The British Retail Consortium, which measures sales values, reported earlier this month that sales had decelerated in February this year compared to the same month a year ago.
The Confederation of British Industries (CBI) reported retail sales had unexpectedly dropped in February as the overall balance measuring sales volumes declined to a balance of 10%, meaning fewer retailers saw their sales rising during the month.
Despite this deceleration, CBI director of economics Rain Newton-Smith said that "retailers still stand to benefit from the low level of inflation and strong job creation across the economy, which should continue to support household spending."
Disclaimer: The information provided by WBP Online come from its Reporters and Foreign Correspondents and its third party suppliers ("Information Providers"). WBP Online believes its text services to be reliable, but accuracy is not warranted or guaranteed. This includes facts, views, opinions and recommendations of individuals and organizations deemed of interest.
Neither WBP Online nor Information Providers guarantees the accuracy, completeness or timeliness of, or otherwise endorses, these views, opinions or recommendations, gives investment advice, or advocates the purchase or sale of any security or investment.