Retail gross sales defy gloomy expectations amid garments and jewelry demand

British retail sales defied expectations to deliver growth last month as household goods stores enjoyed their strongest growth for nearly four years.

The Office for National Statistics (ONS) estimates sales volumes increased by 1 per cent month-on-month in February, a far cry from the 0.4 per cent drop predicted by economists.

Supermarkets partially blamed higher prices for lower sales over the month, but this was offset by growing demand at non-food stores.

Household goods shops performed exceptionally well, with sales jumping 6.8 per cent – the largest monthly expansion since April 2021, partly due to a roaring trade among hardware businesses.

Watches and jewellery sellers also experienced a bumper February as elevated economic uncertainty led to more Britons buying gold, a traditional safe haven during times of market stress.

And textile, clothes and footwear shops recovered ground with a 2.3 per cent uptick, boosted by heavy discounting at clothing stores.

Charlie Huggins, head of equities at Wealth Club, said: ‘In order to get consumers to part with their cash, retailers are having to work harder than ever before.

‘This means increased levels of discounting – a good way to drive sales in the short term, but not necessarily great for profit margins.’

Unexpected: British retail sales surprisingly rose last month as household goods stores enjoyed their strongest growth for nearly four years 

To coincide with the Spring Statement earlier this week, the Office for Budget Responsibility [OBR] halved its economic growth forecast for the UK economy from 2 per cent to 1 per cent.

It attributed approximately one-third of the lower growth to ‘structural weakness’ in productivity and the other two-thirds to ‘cylical weakness,’ including higher energy price and interest rate expectations, and weak consumer confidence.

The OBR also predicts real earnings will rise by 1.4 per cent in 2025 before stagnating over the following two years.

Jacqui Baker, head of retail at RSM UK, said: ‘This week’s Spring Statement didn’t fundamentally change anything for retailers, but it did confirm that disposable incomes look set to continue to increase.

‘If this feeds through into consumer spending, then the upward trend in sales could help to mitigate the imminent post-Budget headwinds that are due to hit in April.’

From next month, employers will have their National Insurance Contributions go up by 1.2 percentage points to 15 per cent.

Meanwhile, the threshold at which companies start paying NI on staff salaries will fall from £9,100 per year to less than £5,000, and business rates relief will drop from 75 per cent to 40 per cent, up to a cap of £110,000 per firm.

Many prominent British retailers have warned that the changes will force them to either raise prices, cut jobs, or slow wage hikes.

Huggins added: ‘For now, the UK consumer appears to be holding up. But risks to the economy are building and retailers remain stuck between a rock and a hard place. One thing is for sure – they cannot afford to rest on their laurels.’