UK shoppers return to high street in February as prices continue to rise
UK retail sales exceeded seasonal norms in February as shoppers returned to the high streets as COVID restrictions eased, but prices continued to rise rapidly.
According to the Confederation of British Industry’s (CBI) latest quarterly distribution occupations survey, retail sales beat expectations, hitting -16% in February, from a 23% drop in January.
The monthly retail sales balance halved from 28% in January to 14% in February, the CBI said. The balance is the difference between survey respondents reporting an increase and a decrease.
Meanwhile, online sales fell sharply and for only the second time since 2009, falling to -11% from -2% the previous month, as shoppers returned to physical stores. CBI said it expects internet sales to be “broadly flat” in March.
Retail prices also continued to grow rapidly in the quarter ending February amid soaring inflation and higher interest rates, year-on-year at +75% down slightly from +77% in November. They should reach +81% next month.
Figures show retailers have raised selling prices almost as much as they did at the end of 2021, which saw the biggest price increases since 1990. Prices are expected to climb even faster in the quarter, the group said. .
“The easing of COVID restrictions – including the end of work-from-home advice – has unsurprisingly encouraged shoppers to return to the high streets,” said CBI economist Martin Sartorius.
January’s sales figures had been supported by comparisons with a year earlier, when non-essential retailers were closed due to lockdown restrictions.
Economists say that despite the increase in footfall and sales, retailers face additional challenges apart from inflation, interest rates and rising energy bills.
“However, retailers face other challenges. The conflict in Ukraine means that energy prices and transport costs will rise further, which will increase the pressure on retailers’ operating costs and eat into the household purchasing power,” said Sartorius.
The CBI surveyed 115 companies and wholesalers, including 46 retailers, between January 28 and February 14.
Separate data released last week showed UK retail sales rose faster than expected in January. The figures of the Office of National Statistics (ONS) suggest inflation has yet to have a massive impact on consumer spending, with the volume of goods sold online and in-store rising 1.9% and providing a much-needed rebound from the shock of 4% induced by Omicron in December.
But, experts expect consumers to tighten their purse strings in the coming months as inflation is expected to peak at 7%and households face higher energy bills and tax hikes in April.
“Retailers will be acutely aware that the cost-of-living squeeze could cause consumers to watch their spending more closely in the weeks and months to come, which will impact commerce,” said Paul Martin, head of the UK retail at KPMG.
“As with consumers, retailers are also facing inflationary pressures. Businesses have tough decisions to make about how to absorb or pass them on without losing the customer base. »
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