U.K. Retail Sales Fall More Than Forecast Amid Snow Chaos
(Bloomberg) -- U.K. retail sales plunged in March as snow and freezing temperatures kept consumers indoors and disrupted deliveries of stock.
The data comes as a fresh blow to the British high street after a year of consumer pullback in the face of rising prices and sluggish wage growth. While pay and inflation data this week show tentative signs that the squeeze may be starting to ease, the weather disruptions have added to the problems facing big-name retailers such as department store Debenhams, which issued a profit warning Thursday amid weaker demand for discretionary items.
The volume of goods sold in stores and online declined 1.2 percent, double the drop predicted by economists, according to figures from the Office for National Statistics on Thursday. Sales excluding auto fuel fell 0.5 percent, also more than forecast. The pound slipped after the data, falling 0.1 percent to $1.4183 as of 10:14 a.m. in London.
The figures round off a week of weaker-than-expected reports that saw traders pare back bets on the pace on Bank of England tightening, with two rate increases this year seeming increasingly unlikely. Even so, policy makers will probably look through the weather-impacted retail data, according to Jean Boivin, head of economic and market research at BlackRock Inc.’s Investment Institute.
“There are temporary factors at play,” he said in a Bloomberg Television interview. “I would be surprised if the framework in which the Bank of England is operating right now is predicated on this week’s numbers. This is worthy of note but I don’t think this is something that changes the view on whether you need two hikes or not this year.”
Travel chaos paralyzed Britain from late February when the Beast from the East and then Storm Emma brought sub-zero temperatures and blizzard-like conditions to much of the country. Another blast swept in around the middle of the month.
Among the worst hit were sales of clothing and household goods, down 0.7 percent and 0.2 percent respectively. Supermarkets saw sales fall 0.6 percent and sales of auto fuel plunged 7.4 percent as consumers turned to online shopping and local food stores amid the bad weather. Internet sales overall accounted for 17.4 percent of sales in March, a record high.
There was also a boost from spending on gifts ahead of Mother’s Day and Easter, with the long holiday weekend starting earlier than usual this year on March 30.
Sales between January and March fell 0.5 percent, the worst quarterly performance in a year. That will knock 0.03 percentage point off GDP growth, which is expected to have slowed in the period. The March survey covers the period between Feb. 25 and March 31.
While the pressure on living standards is easing, consumers are expected to remain relatively cautious, especially with more BOE rate increases looming. Among G-7 economies, only Italy and Japan are forecast to grow less than Britain over the next two years.
©2018 Bloomberg L.P.