U.K. Retail Sales Surge as Consumers Defy Brexit Turmoil

(Bloomberg) -- Go inside the global economy with Stephanie Flanders in her new podcast, Stephanomics. Subscribe via Pocket Cast or iTunes.

U.K. retail sales increased for a third consecutive month in March, with online shopping and groceries accounting for much of the improvement.

The volume of goods sold jumped 1.1 percent from February, defying economists’ expectations of a decline. Almost three quarters of the increase was due to “non-store” sales and food, the Office for National Statistics said Thursday.

The strength of online sales contrasts with the gloom in bricks-and-mortar retailing, with department-store owner Debenhams Plc becoming the latest victim this month when lenders took over in a debt restructuring deal that wiped out shareholders. Philip Green’s Arcadia Group Ltd. retail empire has named restructuring experts to its board, while the likes of BHS and electronics chain Maplin have disappeared entirely.

Sales at department stores and spending on household goods fell in the latest three months compared with a year earlier, while non-stores sales jumped more than 18 percent. Online operators now account for 18.6 percent of the value of all retail sales.

The resilience of consumers in the face of Brexit uncertainty is largely being supported by the labor market, where pay growth is picking up, employment is at a record and the jobless rate is the lowest its been since the 1970s.

But there are signs that some households are under pressure as they emerge from a protracted inflationary squeeze on living standards. The Bank of England reported on Thursday that defaults on credit cards rose significantly at the start of the year.

Retailers made a positive contribution to the economy in the first quarter, with sales rising a respectable 1.6 percent from the final three months of 2018. That added 0.09 percentage point to growth, according to the ONS.

Meanwhile, businesses are cutting spending, fearing an economic slowdown could turn into a slump if the U.K. ends up leaving the European Union without a deal to cushion the blow.

Retail sales last saw three straight gains in the summer of 2017. But the annual pace of growth was inflated by poor figures in March 2018, when Britain was hit by snow and freezing temperatures. Sales leaped 6.7 percent from a year earlier in March, the fastest pace since October 2016, and were up an annual 5 percent in the first quarter.

Departments stores were the only retail segment that sold less last month than they did a year earlier.

Retail sales excluding auto fuel rose by 1.2 percent last month, with warmer weather encouraging spending and food sales also recovering after a weak February. Clothing and household goods posted strong gains, only partly offset by weaker sales at department stores.

--With assistance from Eric Pfanner.

To contact the reporters on this story: David Goodman in London at dgoodman28@bloomberg.net;Lucy Meakin in London at lmeakin1@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Andrew Atkinson

©2019 Bloomberg L.P.