(Bloomberg) -- UK retail sales climbed more sharply than expected last month, returning to their pre-pandemic levels as discounting enticed consumers back into the shops.

The volume of goods sold in stores and online rose by 1.2% from January, the most since October, the Office for National Statistics said, exceeding the 0.2% uptick expected by economists in a Bloomberg survey.

It was the second consecutive month in which sales beat forecasts, following an upwardly revised 0.9% rise in January.

The data add to the impression that UK consumers are weathering the cost-of-living crisis better than expected, and will help to bolster the Bank of England’s decision earlier this week to hike its base interest rate by another 25 basis points to 4.25%.

Stronger-than-expected consumer spending will also come as a relief to Prime Minister Rishi Sunak, who has vowed to boost growth in the UK and is hoping to avoid the prolonged recession that many economists had predicted earlier this year.

“A rise in sales for February suggests that consumer confidence is heading in the right direction after a difficult few months,” said Aled Patchett, head of retail and consumer goods at Lloyds Bank. “Those in the industry will be hopeful that warmer temperatures and a fall in gas prices will be the spark needed to free up disposable income amongst consumers and lead to a longer period of growth.”

Sales excluding auto fuel rose 1.5%. Sales of petrol and diesel fell 1.1% from January, when rail strikes increased car travel. 

The figures leave the retail sector on course to contribute to economic growth in the first quarter. Retail sales will rise over the period unless March posts a drop of 1.7% of more.

However, sales were strongest at stores that offered bargains, a sign of the cost-of-living pressures facing consumers. These included department stores, where sales jumped 5.5%. There were also strong sales of second-hand goods. Food sales rose 0.9%, with anecdotal evidence of reduced spending in restaurants and takeaways because of the squeeze on budgets.

The figures come just days after it emerged that inflation had ticked up again in February, bucking expectations that it would fall into single digits for the first time since August 2022. Instead, it climbed from 10.1% to 10.4%.

Earlier on Friday the Consumer Confidence Barometer from analytics firm GfK showed consumers were becoming more pessimistic about their personal finances.

While overall optimism among households ticked up marginally in March, with respondents saying their outlook on the past 12 months and the year ahead had improved, they were more pessimistic about their own financial circumstances.

The Bank of England’s network of agents, who speak to businesses around the country, were also picking up on signs of weakness. Retailers said customers were “switching down to the discount chains” and buying cheaper products, while sales of furniture and other durables were weak.

Retailers also reported to the agents that sales of second-hand goods were becoming more popular, while consumers were increasingly looking to repair items rather than buy new ones, according to the BOE.

While volumes are going up, consumers are still paying more for less. The value of goods bought was 16.6% higher than February a year ago, but the quantity bought was flat.


Read more: 

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  • Britain Holds Up Better Than Expected in Cost-of-Living Crisis
  • UK Food-Retail Sales Leverage Pricing Amid Volume Challenges

(Adds details from report)

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