- Retail sales volumes rose 2.1% month-on-month in February after a significant decline of 8.2% in January, suggesting that consumers had shed some of the initial caution evident when the current lockdown was first imposed
- February’s modest rise in retail sales was helped by robust online sales (up 4.6% month-on-month and 77.6% year-on-year in value terms), taking the online share of total sales up to a record 36.1%
- The modest rebound in retail sales adds to the evidence that the economy improved in February, after GDP declined a less-than-expected 2.9% month-on-month in January. The EY ITEM Club now expects that GDP contraction in the first quarter may now be limited to just over 1% quarter-on-quarter, significantly less than the 3-4% q/q GDP contraction earlier anticipated
- Consumers look well-placed to play a key role in UK recovery from the second quarter onwards as restrictions on activity are eased. Consumer confidence picked up in March to a one-year high, according to GfK. Retail sales should receive a substantial lift from the planned re-opening of non-essential retailers from 12 April
- Consumer activity should benefit from high savings ratios, especially as it now looks likely that unemployment will rise much less than previously predicted, in part thanks to the furlough scheme extension. The EY ITEM Club has reduced its projected peak in the unemployment rate to 6.0% from the previously expected 7.0%
Howard Archer, chief economic advisor to the EY ITEM Club, says:
“Retail sales volumes rose 2.1% month-on-month in February, despite non-essential stores remaining closed. This marks a modest rebound after an 8.2% fall in January when lockdown measures were brought back in.
“The year-on-year fall in retail sales volumes narrowed to 3.7% in February from 5.9% in January.
"The ONS reported that food stores provided the largest positive contribution to the monthly growth in February 2021 sales volumes, aided by strong increases of 16.2% and 16.1% in department stores and household goods stores respectively.
“Clothing retailers suffered a substantial 50.4% year-on-year decline in sales in February, however.
“The modest rebound in retail sales was helped by online sales rising 4.6% month-on-month and 77.6% year-on-year in value terms. The online share of total retail sales rose to a record 36.1% in February from 35.2% in January and 29.6% in December. This was a significant increase from 20.0% in February 2020 and 19.5% in January 2019.
“It is evident that the pandemic-related restrictions on non-essential stores has accelerated an already underlying trend for online sales rising.
“The annual retail sales deflator fell 0.6% year-on-year in February, with fuel prices down 3.2% year-on-year. Excluding fuel prices, the annual retail sales deflator was down 0.4% year-on-year in February.”