UK Retail Sales Unexpectedly Rise As Economy Grows

(RTTNews) - U.K. retail sales unexpectedly rose for a second straight month in March, suggesting that consumer spending is set to lead the economic recovery that is gaining momentum.

Retail sales including automotive fuel rose 0.1 percent month-on-month, figures from the Office for National Statistics showed Friday. That followed a 1.3 percent gain in February, which was revised down from 1.7 percent. Economists had forecast a 0.4 percent decline for March.

Year-on-year, sales grew 4.2 percent in March, after a 3.3 percent rise in the previous month, which was revised down from 3.7 percent. Economists had expected 3.8 percent growth.

"With employment, consumer confidence, wages and the housing market all moving in the right direction we remain upbeat on the outlook for consumer spending," ING Bank economist James Knightley said.

In February, the U.K. unemployment rate fell below the 7 percent threshold to a five-year low and average earnings finally moved above inflation reducing the squeeze on household finances.

In the first quarter, retail sales rose 3.8 percent year-on-year, the ONS said. Sales grew 0.8 percent sequentially in the three months to March compared to a 0.6 percent gain in the December quarter.

The ONS is set to release the preliminary GDP estimates for the first quarter next week. The Bank of England this week said the economy may have grown 1 percent in the first three months of the year.

Sales at non-food stores surged 9.6 percent year-on-year in March, the biggest growth since April 2002. This may partly reflect the negative effect of the very cold weather a year earlier, which was the second coldest March on record, in contrast to the warm weather in March 2014, the ONS said.

Food store sales declined 2.3 percent annually, which was the biggest fall since April last year, when they fell 2.9 percent.

Excluding automotive fuel, retail sales fell 0.4 percent monthly in March, after a 1.3 percent rise in the previous month, revised from 1.8 percent. A 0.5 percent declined was forecast by economists.

Annually, sales rose 4.2 percent, after a 3.9 percent growth in the previous month. Economists were looking for a 4.5 percent gain.

Results of a survey by the Confederation of British Industry showed on Thursday that U.K. retailers reported sales growth for the fifth consecutive month in April and expect sales to expand at a faster pace next month.

Further, today's ONS report showed that retail prices dropped 0.5 percent annually in March, down for a second straight month. It was the biggest drop since September 2009, when prices fell 0.8 percent. The decline continued to be led by falling fuel prices.