Despite the rise in February's retail sales, last year’s retail boom looks set to become a distant memory - EY ITEM Club comments

23 March 2017

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  • February sees the first rise in sales volumes since last October
  • But underlying picture remains weak
  • Rising shop prices means 2017 remains on course to be a tough year for retailers

Martin Beck, senior economic advisor to the EY ITEM Club, comments:

“A 1.4% monthly rise in retail sales volumes in February was the first increase since last October lifting annual growth from 1% to 3.7%. Among the various parts of the retail sector, household goods put in the best performance.

“However, February’s increase still left volumes below the level of four months ago. And on a three-month-on-three-month basis, sales were down by 1.4%, the weakest performance since March 2010. Moreover, the outlook for the first quarter of 2017 is poor. Short of an unprecedented 3.3% rise in sales in March, Q1 will deliver the first quarterly retail contraction since the last three months of 2013.

“With shoppers facing a combination of still-subdued pay growth and rising inflation, Q1’s likely weak performance may be a harbinger for 2017 as a whole. Annual shop price inflation increased to 2.8% from 1.9% in January, a 60-month high. How the year pans out will depend heavily upon consumers’ willingness to draw on savings or take on more debt. While these sources may deliver some mitigation to squeezed spending power, last year’s retail boom looks set to become an increasingly distant memory.”

Ends

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