Sterling received a boost after stronger-than-expected UK retail sales numbers for February. According to a report released by the Office for National Statistics (ONS) on Thursday, sales volumes rose 5.7% year-on-year. The prior 5.4% figure was revised up to 5.9%. Most economists expected retail sales to rise just 4.7% on the year. Meanwhile, on a month-on-month basis, retail sales rose 0.7% versus 0.4% expected. January’s figure was revised to a 0.1% gain from an original reading for a 0.3% decline.
The data today indicate that the UK economy is continuing to grow strongly. According to the ONS part of the boost comes from last year’s recovery in the British housing market which in turn led to an increase in furniture purchases and sales growth in other sectors as well. Sales of household goods rose 1.2% due to the increase in home sales. Clothing and footwear gained 1% m/m and department store sales rose 1.7% m/m. UK retail sales account for around a third of consumer spending so the stronger data today is significant, especially ahead of national elections on May 7. In other sectors, food sales gained 0.2% while auto fuel sales rose 0.4%.
Consumer spending in the UK has been helped by lower consumer prices as inflation in the country has been falling. Headline CPI fell to zero in February. Meanwhile wages are recovering as well in real terms. Additionally, the sharp fall in oil prices have put more money in consumers’ pockets as their savings from fuel costs have been funneled to other types of spending.
The pound extended gains against the dollar after the retail sales report and peaked at a high of 1.4993 at 09:34 GMT before easing back down.