UK retail sales Preview: February retail sales are expected to rise mildly after winter deadlock
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- UK retail sales are expected to rise 0.4% m/m while rising 1.3% y/y in February.
- UK core retail sales excluding motor fuel are seen rising 0.4% m/m and 1.2% y/y.
- Negative real, inflation-adjusted wage growth is weighing on retail sale in the UK.
The UK retail sales including and excluding motor fuel sales are expected to rise 0.4% over the month in February, rising 1.3% and 1.2% respectively over the year, the Office for National Statistics is expected to report on Thursday, March 22 at 9:30 GMT.
The UK retail sales reported very choppy results during previous two reports, always coming out less than the market consensus. While retail sales in January missed the expectation rising 0.1% compared to the expected increase of 0.5% over the month in January, December figure marked disappointing -1.5% m/m fall compared to -1.1% monthly fall expected.
Based on partial reports for February, total retail sales in the UK should experience a mild pick up. The British Retail Consortium (BRC) in cooperation with KPMG is publishing their own monthly report that saw retail sales in the UK rising 0.6% over the year for January 28-February 24, 2018 period.
BRC also reported the deteriorating structure of UK retail sales due to higher inflation and relatively low nominal pay increase that is leaving consumers having to spend more on food and basic living expenses relative to non-food items. When three months average is taken to account, the UK in-store retail sales of non-food items declined 3.3% three-month-to-three-month basis.
“The headwinds to retail spending continued to blow strong in February. Inflation is still eating into shoppers’ budgets, pushing them to spend a greater share of their income on essentials and leaving less left over to buy discretionary, predominantly non-food, retail items. At the same time, weak growth in household earnings is keeping overall sales low,” Helen Dickinson, chief executive at BRC said in the February retail sales report.
Within the structure of the UK retail sales, the internet sales are gaining traction with the total share of retail sales on internet rising to 21.1% in February 2018 compared to 20.5% in February last year, the BRC said.
Negative trend of the UK retail sales contributing almost nothing to overall economic growth was also confirmed by the ONS in the GDP report for the final quarter of last year. With the negative effect of past Sterling’s depreciation fading away and inflation in the UK decelerating thereafter, the prospects for the UK retail sales to generate higher growth rates in spring 2018 are rising, although negative real, inflation-adjusted wages still continue to weigh on consumers.
UK retail sales January 2016-January 2018
Source: Office for National Statistics
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