UK retail sales in February grew at the slowest pace since 1995 as consumers reduced their spending amid fears of deepening recession and rising unemployment.
In a report, the Office for National Statistics said retail sales volume recorded an annual increase of 0.4% in February, which was the weakest growth since September 1995. Annual growth stood much below 2.5% rise expected by economists.
With all sectors reporting decrease in sales volume, overall retail sales dropped 1.9% in February from the previous month, following a 0.8% increase in January. Economists were expecting a monthly 0.4% decrease.
Among all sectors, other stores showed the largest decrease in February, falling 4.8%. Food sales slid 0.3%, while non-food sales dropped 3.2%. Textile, clothing and footwear store sales slipped 3.7%.
In the three months to February, retail sales volume rose 2% compared with the previous three months. Meanwhile, sales value for all retailing was 1.4% higher than in the same period a year earlier.
The average weekly retail sales value in February was estimated at GBP 4.8 billion, down 0.4% from February 2008. The implied price deflator for February rose 0.3% annually.
Internet sales represented 3.4% of total sales in February and the unadjusted average weekly value of internet sales was around GBP 167 million.
According to a survey conducted by the Confederation of British Industry, falls in retail sales sharpened again in March and retailers do not foresee an improvement in the coming month. Around 63% of survey participants said their sales were down in the first half of March, while 19% reported increase. The recession continues to force consumers to re-examine every item of spending.
David Kern, Chief Economist at the British Chambers of Commerce said consumers are beginning to feel the pinch. Today's worrying retail sales numbers confirmed the depth of recession, indicating that GDP in the first quarter of this year will register a further sharp drop.
The Bank of England had said the economy would contract at an annual rate of 4% by the end of the first half of the year. Amid deepening recession, the number of people claiming jobless benefits in the UK logged a record monthly increase of 138,400 in February, while the number of unemployed crossed 2 million for the first time since 1997.
Annual inflation accelerated in February to 3.2% mainly on weak sterling. But BoE Governor, Mervyn King expects sharp decline in CPI inflation since its peak in September to resume in the coming months.
A separate report from the ONS revealed that business investment in the fourth quarter totaled GBP 34.95 billion, which was 1.5% lower than in the third quarter. Investment declined 4.5% from GBP 36.59 billion in the fourth quarter of last year.
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