LONDON (Reuters) - Retail sales suffered their biggest monthly fall in nine months in February and were revised sharply downwards for January, official data showed on Thursday, dampening hopes that a consumer revival this year will boost the economy.
Sales data is well-known for its volatility but the latest figures are still consistent with a sluggish underlying recovery.
Central bankers and the government have been betting on a modest recovery in consumer spending in 2012 as falling inflation should leave Britons with more money to spend, and the February drop comes as a surprise after a recent set of solid results from major British retailers.
Coming the day after finance minister George Osborne’s annual budget gave little help for dejected consumers, Office for National Statistics’ data showed that retail sales volumes fell 0.8 percent on the month in February to give an annual rise of 1.0 percent - both well below economists’ forecasts.
January’s sales growth figures were revised down to 0.3 percent from 0.9 percent on the month, with the ONS blaming late data from smaller stores which failed to maintain their previous strong growth.
February’s monthly drop was driven by the biggest fall in sales in other stores - whose merchandise ranges from computers to toys and watches - since January 2010, with a sharp drop in sales of goods including fine art and antiques leading the fall.
“There is not a lot of momentum out there. We had weak industrial production, weak retail sales, so the data paint a weak picture,” said Commerzbank economist Peter Dixon.
Gilt futures extended gains after the release and sterling fell against the dollar.
But British retail sales data is typically volatile - both on the ONS measure, and that produced by industry body the British Retail Consortium. Thursday’s data shows that the annual rate of growth in retail sales values stood at 3.2 percent in February versus 3.7 percent in January, closing much of the gap with the BRC’s measure, which registered 2.3 percent growth in February.
In a sign that consumers may be healthier than the latest figures suggest, the government’s independent forecasting unit, the Office for Budget Responsibility, revised up its forecast for household consumption growth this year to 0.5 percent on Wednesday.
Supporting that view, the ONS figures showed that retail sales in the three months to February were 1.7 percent higher than a year ago, the biggest increase since December 2009.
Britain seems to be slowly recovering from a contraction at the end of 2011 but faces headwinds from the government’s austerity drive, reaffirmed in the budget statement.
Most business surveys at the start of this year have pointed to modest growth in the first quarter, and Thursday’s figures also contrast with reasonable results from big retailers.
On Thursday home improvements group Kingfisher and fashion chain Next reported rising profits, suggesting conditions could be starting to improve for retailers after a prolonged squeeze on consumers’ incomes.
“The retail sales series is especially volatile at this time of year, so it would be wrong to draw too many firm conclusions on the back of this release,” said Philip Shaw, economist at Investec. “Nonetheless, if there were some questions being asked about why retail sales had been so strong, this release probably answers them.”
editing by Ron Askew