Retail sales struggle with shoppers reluctant to spend

High street shoppers still appear to be cautious, as official figures showed today that retail sales grew by far less than expected last month.

Sales volumes rose by just 0.4% - compared with the 0.8% expected by the City - although the value of goods sold rose 0.9%.

Annual growth in retail sales volumes now stands 2.2% ahead of 12 months ago, the Office for National Statistics said.

Stripping out fuel sales, retail volumes were even more sluggish - growing just 0.2% month on month - despite the help to retailers from an earlier Easter.

Although February's sales growth was revised up to 2.5% as shops bounced back from a snow-bound January, the figures also showed volumes down 1.7% in the first quarter of the year compared with the final three months of 2009.

Economists warned the depressed retail conditions could impact on eagerly awaited growth estimates for the first quarter of 2010 due tomorrow.

Experts expect the economy to have grown by 0.4% in the first three months of 2010, the same pace at which the country left recession in the final quarter of 2009.

Howard Archer, chief economist at IHS Global Insight, said: "Although the economy still seems likely to have expanded for a second successive quarter, the retail sales data add to the risk that the GDP data could disappoint on the downside."

There were also warnings of increasing pressure on the high street in the months ahead as measures to tackle the UK's record deficit kick in following the election.

ING Bank economist James Knightley said: "With consumer confidence starting to fall again, wages continuing to fall in real terms and taxes set to go up further, we see the potential for weaker retail sales numbers as we move through the year."
end