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UK retail sales rebound in Feb amid gloomy quarter

London - UK retail sales rose more strongly than expected in February but the outlook for the British consumer remains weak.

The volume of goods sold in stores and online jumped 1.4%, beating the 0.4% gain predicted by economists, Office for National Statistics figures published on Thursday show. It left sales down 1.4% in the latest three months, the biggest quarterly drop since early 2010.

The underlying figures add to evidence that households are starting to feel the squeeze from increasing food and fuel prices, bad news for an economy that relies heavily on consumer spending for growth.

The report comes a day after IHS Markit said households are more pessimistic about their financial prospects than at any time since 2013 and the Bank of England warned of a further slowdown in sales.

Sales will fall in the first quarter unless March sees an unprecedented 3.3% gain. Sales last declined in a calendar quarter more than three years ago.

Inflation is now at its fastest since 2013 is course to overtake wage growth, leaving Britons with less to spend on non-essential items. The price of retail goods sold in February increased on an annual basis by 2.8%, the most since March 2012.

Sales rose across the board in February, with household goods rising 3.7% and clothing growing 1%. Sales were up 3.7% from a year earlier. Excluding auto fuel sales, they gained 1.3% on the month.

The figures may reinforce speculation that the BOE is a long way from raising its key interest rate, despite one official breaking ranks this month to vote for an increase. Governor Mark Carney has said policy makers are closely watching consumer spending for signs of weakness.

Consumers have in part financed their spending by saving less and borrowing more, taking advantage of falling borrowing costs. They may be unwilling to keep doing so at a time of heightened uncertainty as Britain begins the process of leaving the European Union.

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