UK retail sales posted growth of 1.1% in February - ING

James Smith, Developed Markets Economist at ING, suggests that with overall retail sales of UK growing at just 1.1% year-on-year (excl. fuel), it appears that consumers are still holding back on non-essential purchases.

Key Quotes

“This echoes what the data from the British Retail Consortium and Visa has been saying, with both pointing to a further slowdown in spending.”

“In theory, though, prospects should improve for retailers over the next few months. Inflation is beginning to ease now that prices have more-or-less adjusted to the new value of the pound, while wage growth has shown a surprising amount of energy of late. But while the combination of these two factors means the spending squeeze has passed its worst, incomes in real terms don’t look set to rise meaningfully anytime soon. Partly with this in mind, consumer confidence remains stubbornly low (not far off the Brexit lows), which is particularly stark when compared to Europe and the US, where shoppers are the most optimistic they’ve been since the early-2000s.”

“But while this will keep the brakes on growth this year, the Bank of England will be focussed squarely on wage growth as they meet today.”