Retail sales bounce back after dreadful start to 2010

Retail sales bounced back in February after a dire start to the year for Britain's shops. Strong sales of homewares pushed up the value of sales by 1.9% from January and 4.9% on the same month last year, according to figures from the Office for National Statistics. The volume of sales increased at a slightly slower rate on a year earlier as shops took the opportunity to push up prices. Better-than-expected profits announced today by Next and Kingfisher supported the view that shoppers were back on the high street. The figures will please the chancellor, Alistair Darling, who said in yesterday's budget that the UK economy was stronger than many doomsayers had predicted, with better-than-expected tax receipts. However, analysts were quick to point out that comparisons with 2009 were almost certainly going to be higher after the dive in spending last year in the wake of the Lehman Brothers collapse. Alan Clarke, economist at BNP Paribas, said: "The simple fact is it snowed in January, and that stopped people from going shopping. It stopped people driving long distances - which is important for these numbers since auto fuel is included. "When the big thaw came - guess what? people went shopping again and people started driving longer distances again - the result of which was a snapback in retail sales. Vicky Redwood of Capital Economics said the sharp increases were less impressive than they look. The overall picture presented by figures for the two months combined showed the VAT increase had taken the edge off high street spending. "Even another big 2% odd rise in total sales in March will leave them down in Q1 overall compared to Q4 – suggesting that the risk of a renewed drop in GDP has not passed," she said. Howard Archer of IHS Global Insight added that weaker retail sales in the first quarter are likely to be countered by improved consumer spending on services. "Nevertheless, it looks highly likely that consumer spending will have contracted in the first quarter of 2010, which is bad news for growth prospects given that consumer spending accounts for some 65% of GDP," he said. The City is also likely to take a cautious view after figures earlier this week from the CBI that showed high street sales growth slowed again in the first half of March. A 13% balance of retailers reported stronger sales than a year ago – lower than expected and well below February's 23%, according to the business group's distributive trades survey. The CBI warned that the fragile economy and pay freezes for many meant consumers were likely to remain cautious for some time.