Despite retail sales in February 2012 being up on February last year they fell when compared to January 2012.

The Office for National Statistics (ONS) reports that, by value retail sales were up by 3.2% in value on February 2011 and by 1% in terms of volume.

In contrast sales were down by 0.4% in terms of value on January 2012 and down by 0.8% in volume.

When looking at the three months to February, sales by value have increased by 1% and sale by volume have increased by 0.7%.

Nida Ali, economic advisor to the Ernst & Young ITEM Club commented “Retail sales were very disappointing in February. But following two months of firm increases, growth in the three months to February (compared to the previous three months) is still robust at 0.7%. These figures are not surprising, as factors such as heavy discounting were supporting volumes over the past couple of months. This was clearly unsustainable and it was only a matter of time before weak economic conditions took over.

“Sales volumes fell in all sub-sectors, reflecting the scale of weakness in consumers' purchasing power. Moreover, with the firm increase in retail sales in January having unwound in February, this doesn’t bode well for growth in Q1.

“The fundamentals underpinning consumer spending are still weak. Wage growth is sluggish, unemployment is on the rise and households are heavily indebted. With inflation now starting to cool, the pressure on individuals' incomes is likely to ease somewhat, but it will be a long time before real incomes actually start to increase. Many retailers have been forced to go out of business in recent months, and the challenge for retailers is not yet over.

While Richard Driver, analyst for Caxton FX said “This morning’s UK retail sales figure certainly caught the market by surprise. We were confident spending was going to moderate significantly after December and January’s bumper growth figures as that trajectory was never sustainable. Nonetheless, -0.8% m/m is very disappointing and the slight downward revision to the previous two month’s figures is a reality check for the retail industry.

People on the

People on the

“Yesterday’s Annual Budget announcement highlights that UK households are going to remain tightly squeezed for the rest of this year but with inflation falling and growth slowly picking up, there is room for optimism.

“It is not all doom and gloom however, as some high street heavyweights like Next and Debenhams posted some decent profits recently and with the Olympics on the horizon, as well as the relaxing of Sunday trading laws, the UK retail sector could be in line for a much-needed boost.

“We were expecting to see surging petrol prices provide a boost to non- fuel sales as consumers look for more cost-effective ways to spend their money but this simply wasn’t the case.”

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