Retail sales in Great Britain have seen an increase this month, with a notable rise in spending at department stores, hardware shops, and clothing outlets.
The Office for National Statistics (ONS) reported a 1% rise in sales volumes compared to the previous month. Although the sales at supermarkets decreased, this was following an unusually high month in January, indicating a stronger economic situation than initially feared.
Economists from the City had anticipated a 0.4% decline, due to low consumer confidence following a near-stagnant economy in the latter half of the previous year.
These findings will be seen as positive news for Chancellor Rachel Reeves, particularly following the presentation of the spring statement where growth forecasts for 2025 were halved by the government’s independent forecaster.
Additionally, the ONS confirmed a 0.1% growth in the UK economy in the final quarter of 2024, matching their original estimate from February. They also adjusted their growth estimates upward by 0.1 percentage points for each quarter between the final months of 2023 and the second quarter of 2024, now estimating the economy grew by 1.1% in 2024.
Thomas Pugh, an economist at RSM UK, noted that the economy is stronger than initially thought and households are in a good financial position. However, business confidence remains low, with concerns over the potential impacts of US trade tariffs.
The upcoming increase in minimum wage, employer national insurance contributions, and business rates could pose a challenge for retailers. Despite this, consumers have been shopping, defying the poor weather in February to take advantage of sector-wide discounts.
Food sales dropped by 2%, which some economists suggest is due to increased dining out, while sales rose in household goods stores by 6.8% as customers prepared for the warmer months. Clothes and shoe shops saw a 2.3% increase in sales.
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Households have largely maintained their savings, refraining from spending amidst uncertain consumer confidence levels.
The ONS reported the household savings ratio increased to 12% in the fourth quarter of 2024, the highest it’s been in nearly 15 years, barring the period during the Covid pandemic.
Elliott Jordan-Doak, a senior economist at Pantheon Macroeconomics, expects retail sales volumes to increase throughout 2025 as households reduce their elevated savings levels, driving future retail sales.
Jordan-Doak added, however, that households will need to contend with rising inflation, the prospect of stable interest rates, and the continuing threat of global trade wars.
