LONDON (Reuters) - British retail sales took their biggest annual fall last month since April 2013, hurt by unfavourable year-on-year comparisons due to the late timing of Easter this year, an industry survey showed on Tuesday.
The British Retail Consortium, a trade body for major retail chains, said total sales dropped by 0.3 percent in March in value terms, the first annual fall since April last year and following a modest 0.7 percent annual rise in February.
Robust consumer demand was the main factor powering Britain's economic recovery last year, despite inflation rising faster than wages. But this year the government hopes that exports and business investment will account for a larger share of growth.
Easter last year fell in March, giving a boost to sectors such as furniture - where purchases are often made over the holiday weekend - which was not repeated this March. The Easter holidays take place in April this year.
However other sectors such as clothes and garden equipment did better, helped by warmer weather this year than a year ago.
"Sales figures are stronger than might have been expected given the fact that Easter has fallen so late this year," said BRC Director General Helen Dickinson, adding that it would be hard to draw conclusions about retailers' health until next month.
The fall in sales in cash terms comes against a backdrop of strong price competition, particularly in the food sector, which led to an average fall in prices of 1.7 percent last month, the biggest since BRC records began in 2006.
On a like-for-like basis, a measure which strips out changes in stores' floorspace and is favoured by equity analysts, retail sales values in March were 1.7 percent lower than a year earlier, again the biggest drop since April 2013. This contrasts with economists' forecasts in a Reuters poll for sales to have risen 1 percent after dropping a similar amount in February.
"The decision by some of the major grocers to go head to head in a billion pound price war will exacerbate this situation," said David McCorquodale, head of retail at accountants KPMG, who sponsor the survey.
"Investors ... will be keeping a keen eye on the sector as they wait to see how these discounts will impact profits and performance, but the winner in this case will be the consumer," he added.
Data from the Office for National Statistics - which focuses on how much consumers buy, rather than how much they spend - showed retail sales volumes excluding fuel grew 4.2 percent on the year in February. March ONS data is due on April 25.
Reporting by David Milliken; Editing by Ruth Pitchford