Business

UK retail sales rise helped by housing market recovery

Woman shopping for sofa in IKEA, Wembley, London Image copyright Reuters

UK retail sales grew more strongly than expected in February, up 0.7% compared with the previous month, according to the Office for National Statistics.

Compared with February 2014, sales were 5.7% higher, boosted by the recovery in the housing market, the ONS said.

Rising home sales boosted purchases of products such as furniture.

Average store prices fell for the eighth consecutive month, falling by 3.6% in February 2015 compared with a year earlier.

The largest contribution to the drop in prices came from the slide in fuel prices, which fell more than 15% over the year to February 2015.

Furnishing and decorating

The ONS's statistics measure sales volumes, or changes in the number of items sold each month. The amount spent also grew in February, up by 0.3% compared with January and 2.2% higher than a year earlier.

Non-food stores saw the biggest increase in sales by volume, in particular household goods which the ONS said was a lagging effect of last year's improvement in house sales, as people furnished and decorated their new homes.

Online sales increased in volume by 10.1%, but the value of online transactions fell by 2.3%.

Image copyright Reuters

The steady increase in retail sales adds to the picture of a recovering UK economy, but will in turn fuel concerns that growth is too reliant on shoppers.

"Although these figures are good news and will strengthen confidence, we must remember that the UK's economic growth remains unbalanced and is too reliant on consumer spending," said David Kern, Chief Economist at the British Chambers of Commerce.

"UK exporters are still facing huge challenges, particularly in the eurozone, which is our largest trading partner."

No 'deflationary spiral'

The previous month's figures were also revised upwards. In January, sales rose 0.1% in comparison with December, rather than the 0.3% fall originally reported.

Observers put the increase in sales down to record low inflation, which has boosted real incomes.

Martin Beck, senior economic adviser to the EY ITEM Club, said: "Falling prices look a prime candidate in explaining February's strength."

Expectations that prices might fall further did not appear to be putting consumers off spending, he added.

"Fears that falling prices might encourage consumers to defer purchases, risking a downward deflationary spiral, currently look very wide of the mark."

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