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Reuters
Published
Mar 27, 2015
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UK retail sales improve in Feb, boding well for economy

By
Reuters
Published
Mar 27, 2015

British retail sales rose at the fastest pace in three months in February, beating expectations and suggesting Britain's consumer-led economic recovery remains strong ahead of national elections in May.

Retail sales rose 0.7 percent last month, their best growth since November and up from 0.1 percent in January, the Office for National Statistics said on Thursday. Economists polled by Reuters had expected growth of 0.4 percent.

Confederation of British Industry


Falling shop prices -- which declined at the fastest rate since at least 1997 -- encouraged Britons to hit the shops in February, with furniture selling particularly well.

A separate Confederation of British Industry survey showed retail sales grew at a solid pace this month as well, which will cheer Prime Minister David Cameron's Conservative Party ahead of a closely-fought election on May 7.

"This strong spending should support growth in the first quarter," said Elizabeth Martins, economist at HSBC, although she added that the uneven nature of the economic recovery could cause problems in future.

"The continued reliance on consumption will do little to rebalance the economy and reduce the current account deficit."

Sterling rose to a one-week peak against the dollar after the data.
On an annual basis, retail sales volumes rose 5.7 percent in February, down a tad from January's 5.9 percent but comfortably beating the Reuters poll consensus of 4.7 percent.

Britain's economic recovery since mid-2013 has relied heavily on consumer spending.

Wages are recovering after falling in real terms for most of the period since the financial crisis, and inflation in February fell to zero, helped by lower fuel costs which have left more money in the pockets of households.

Store prices fell 3.6 percent in February, the biggest year-on-year decline since records began in 1997, pushed down by lower fuel and food prices, the ONS said.

The biggest contribution came from a 0.9 percent rise in non-specialised store sales, which reflected higher furniture purchases that lagged strong home sales last year.

The CBI survey also showed retail sales growth rose sharply in March, but optimism about sales to come in April waned.

"Taken together with today's official retail sales figures ... the latest CBI survey corroborates the view that while retail spending growth looks set to remain fairly strong, it is unlikely to match Q4's stellar pace," said Paul Hollingworth, economist at Capital Economics.

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