–Retail sales data sharpen policy dilemma at BOE
–Feb retail sales inc. fuel -0.8% m/m; +1.3% y/y
–Feb retail sales ex fuel -1% m/m; +1.2% y/y
–Jan retail sales inc. fuel revised down to +1.5% m/m from +1.9%

LONDON (MNI) – Retail sales volumes fell sharply in February as
prices on the High Street rose at their fastest pace on record, figures
released by National Statistics showed Thursday.

Sales including auto fuel fell 0.8% on the month in February and
were up 1.3% on the year. Analysts had forecast a 0.6% monthly drop and
2.1% yearly increase.

Excluding auto-fuel volumes fell 1% on the month and were up 1.2%
on the year, against the median for a 0.5% monthly decline and increase
of 2.1% on the year.

The latest decline in sales follows strong growth in January which
was revised down to 1.5% on the month from the previously estimated 1.9%
gain.

The latest decline in the volume of sales came as prices rose at
their fastest pace on record, with record increases in household goods
and clothing prices.

On the month in February the retail sales deflator excluding auto
fuel rose 2.4% on the month, the largest monthly gain since records
started in 1988. The annual deflator rose to 2.5%, the highest since
August 2008.

These latest figures sharpen futher the policy dilemma for the Bank
of England. Some members of the Monetary Policy Committee are concerned
about the recent weakness in the consumer sector and these data will
only add to their fears. Meanwhile, the record rise in prices is likely
to strengthen the hawks’ view that interest rates should rise
immediately.

During February, volumes fell in nearly all of the main retail
sales categories with only non-store retailing posting a gain.

Sales at predominantly non-food stores declined by 1.6% on the
month, led by a 3.2% drop in sales at department stores. National
Statistics said there was some evidence that sales of clothing within
department stores had fallen.

Household goods store sales fell 2.5% on the month and were down
5.6% on the year. This followed a rise of 2.5% on the month in January.

“This spike in the January figures can be attributed to consumers
rushing to beat the VAT increase from 17.5% to 20% in the first few days
of January,” National Statistics said.

Clothing and footwear sales declined 1.3% on the month while other
store sales were down 0.2%.

Sales at predominantly food stores declined by 0.4% on the month.

–London bureau: 00 44 207 862 7492; email: drobinson@marketnews.com

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