Return to wage growth fails to stimulate spending

Retail sales in February continued to see a slowdown in growth, according to the latest figures, with non-food stores seeing a decline.

New data from the Office for National Statistics (ONS) revealed that the quantity bought in retail sales in February increased by 0.8 per cent, compared with the previous month, with increases across all sectors except non-food stores.

This increase followed two months of decline in December and January, resulting in an overall decline of 0.4 per cent in the three months to February.

The year-on-year growth rate increased by 1.5 per cent following a general slowdown when compared with an increase of 3.3 per cent in February 2017.

The growth rate was at its highest level in October 2016 when it reached 7.3 per cent.

Compared with a year earlier, the year-on-year growth in the retail sector for both the amount spent and quantity bought rose by 3.9 and 1.5 per cent points respectively. The main contributor for this growth came from non-store retailing.

Price increases continue to take place across all sectors, however there has been a slowdown in growth in the last two months, falling from 3.1 per cent in December to 2.5 per cent in February.

Online sales continued to see an increase in its proportion, accounting for 17.2 per cent of all retail. This continues the general increase in money spent online as the proportion of online spending in February 2017 was at 15.6 per cent.

The year-on-year increase of 13.7 per cent in total online retailing continues the pattern of growth in the sector but at a slower pace than reported in late 2016.

The average weekly spend online increased to £1.23 billion in February, compared with the £1.19bn reported in January.

Rhian Murphy, ONS senior statistician, said: “Retail sales did grow in February, with increases seen in food, non-store and fuel, but this followed two months of decline in these sectors.

“However, the underlying three-month picture is one of falling sales, mainly due to strong declines across all main sectors in December.

“Store prices continue to rise across all store types, but at a lower rate than the previous month due to a slowdown in price growth, though clothing and household goods stores continued to see stronger price rises.”

Rachel Lund, head of retail insights and analytics at the British Retail Consortium said: “February’s retail sales figures showed that consumers are still feeling the grip of inflation on their spending power. Growth in values and volumes on last year remained weak, compared with recent historical standards. Consumers are being careful with their spending, but are not shy of splashing out when the offer is right. February saw furniture sales do well as shoppers took advantage of credit facilities and Valentine’s Day inspired sales of jewellery and watches. That said, the market remains tough for retailers; even with the first glimmers of a return to real wage growth for UK workers this week growth in spending is likely to remain sluggish throughout the coming year.”

ParcelHero’s head of consumer research David Jinks said: “Online stores are continuing to eat high street stores’ lunch, and there seems no end to the problems facing many famous retail names.

“This year we have seen Toys R Us and Maplin electronics fail, and Claire’s Accessories, Mothercare, New Look, Bargain Booze, Wine Rack and Poundstretcher are faltering in various ways. It’s no coincidence that this is happening at a time when e-commerce stores from Amazon to ASOS to Ocado all report healthy results.

“The only glimmer of hope is that Britain’s beleaguered department stores saw an overall 20.7 per cent rise in year-on-year internet sales as their switch to an integrated multichannel approach reaps rewards.’

“The likes of Toys R Us never really enthused internet shoppers. Their online offering failed to capture the excitement of the stores in their heyday and was never an automatic choice for toy shoppers. It looks like it’s being left to department stores such as John Lewis to show how a high street store with a reputation for quality service can carry that over into its online offering. Other retailers have to get this right, or this year’s list of failures could become catastrophic.”