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UK retail sales shrink 0.9% but consumers more confident

UK retail sales Shoppers cross the road in Oxford Street, in London, Britain August 14, 2016.  REUTERS/Peter Nicholls/File Photo
UK retail sales contracted more than expected in March. Photo: Peter Nicholls/Reuters (Peter Nicholls / reuters)

UK retail sales fell by a bigger-than-expected 0.9% in March, as consumers continued to tighten their belts amid high inflation and rising borrowing costs.

It is the first month-on-month decline of the year to date, according to the Office for National Statistics (ONS).

A monthly survey by GfK also revealed consumer confidence was at its highest level in over a year.

Feedback from retailers pointed to bad weather as being the main factor behind a 1.3% drop in non-food sales compared to the previous month. Clothing sales were hit hard, falling by 3.2%.

However, the less weather-dependent food sales were also down, which retailers said was likely due to the cost of living crisis. Food volumes, ONS data showed, dropped by 0.7%.

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ONS director of economic statistics, Darren Morgan, said: "Retail fell sharply in March as poor weather impacted on sales across almost all sectors.

"However, the broader trend is less subdued, as a strong performance from retailers in January and February means the three-month picture shows positive growth for the first time since August 2021.

"In the latest month, department stores, clothing shops and garden centres experienced heavy declines as significant rainfall dampened enthusiasm for shopping.

"Food store sales also slipped, with retailer feedback suggesting the increased cost of living and climbing food prices are continuing to affect consumer spending."

Helen Dickinson, chief executive of the British Retail Consortium, said: “Retailers are optimistic for the big events on the Spring calendar such as the King’s Coronation, and other bank holidays. However, the removal of government support for household bills from this month will mean consumer discretionary spend will be under additional pressure.

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"We need government to help retailers keep prices down and shore up consumer confidence by ensuring any additional regulatory burdens are kept to a minimum, as these additional cost pressures will inevitably mean that consumers will be further squeezed.”

Despite the financial woes UK households continue to face, consumers appear to be more optimistic.

GfK's Consumer Confidence Index rose for the third month in a row but still remained in negative territory at -30.

Respondents were said to have a more positive view of their finances and the health of the wider economy.

Joe Staton, GfK's client strategy director, said: "The brighter views on what the general economy has in store for us ... could even be seen as the proverbial green shoots of recovery."

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