Supermarkets Spur Stronger-Than-Expected U.K. Retail Sales

(Bloomberg) -- U.K. retail sales rose more than expected in February as spending at supermarkets jumped, but a poor month for non-food stores suggests the squeeze on living standards is continuing to weigh on consumers.

The volume of goods sold in stores and online climbed 0.8 percent from January, double the increase forecast by economists, Office for National Statistics data Thursday show. The increase followed declines in the previous two months.

Supermarkets Spur Stronger-Than-Expected U.K. Retail Sales

Sales excluding auto fuel increased by 0.6 percent in February and were up just 1.1 percent from a year earlier. And renewed weakness is expected this month, when snow and freezing temperatures gripped the country. Sales will fall in the first quarter, exerting a drag on the economy, unless March sees an increase of 0.6 percent.

The figures come as the Bank of England prepares to announce its latest policy decision at noon. While officials are expected to keep the benchmark interest rate at 0.5 percent, markets are all-but pricing in an increase in May to head off inflationary pressures emerging in the labor market. The pound was 0.1 percent higher at $1.4157 as of 11:20 a.m. London time.

With inflation easing and wages picking up, British consumers are only now seeing an end to the cost of living squeeze that has taken its toll on retailers from Kingfisher’s B&Q home-improvement chain to suit maker Moss Bros Group.

Food sales rose by 1.1 percent from January and there was also a boost from household goods and goods sold online. But non-food sales overall fell by 0.8 percent, with department stores and clothing shops both experiencing declines, suggesting households are holding back on non-essential purchases.

Retail sales fell 0.4 percent between December and February, the first quarterly decline in almost a year.

“The underlying three-month picture is one of falling sales, mainly due to strong declines across all sectors in December,” said ONS statistician Rhian Murphy.

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