U.K. Retail Sales Growth Tops Expectations

British retail sales continued to expand in February at a faster-than-expected pace, suggesting strong support from domestic spending to economic growth in the first quarter. 

Retail sales increased at a faster pace of 0.7 percent in February from January, when it gained 0.1 percent, data from the Office for National Statistics revealed Thursday. 

The monthly growth exceeded a 0.4 percent rise forecast by economists and marked the fifth straight month of growth. 

Similarly, sales excluding auto fuel increased 0.7 percent and reversed January's 0.3 percent fall. It was forecast to rise by 0.4 percent. 

Food store sales advanced 0.2 percent and non-food store sales rebounded 0.9 percent in February. 

On a yearly basis, retail sales including automotive fuel rose 5.7 percent in February, slower than a 5.9 percent rise seen in January. 

Nonetheless, this was the 23rd consecutive month of year-on-year growth and the longest period of sustained expansion since May 2008, the ONS said. It was also faster than a 4.7 percent rise forecast by economists. 

Excluding auto fuel, retail sales advanced 5.1 percent after expanding 5.2 percent a month ago. Economists had forecast an annual growth of 4.2 percent. 

Average store prices declined for 3.6 percent in February from last year, which was the eighth consecutive fall in prices. Moreover, this was the largest year-on-year fall since consistent records began in 1997. Prices at petrol stations plunged by record 15.5 percent. 

With consumers' spending power rising quickly, the recovery in retail sales volumes should maintain a robust pace over the course of 2015, Paul Hollingsworth, a UK economist at Capital Economics said. 

IHS Global Insight's Chief UK Economist Howard Archer said the prospects for retail sales and consumer spending look bright, as purchasing power should continue to improve despite a relapse in the recent improvement in earnings growth in January. Confidence is elevated, employment is high and rising, and inflation is negligible. 

The Distributive Trades survey published by the Confederation of British Industry today showed that retailers expect sales to continue rising after rebounding in March. 

The retail sales balance rose to 18 percent in March from 1 percent in February. Nonetheless, it was below expectations of 27 percent. 

Retailers expect sales to continue rising next month. A balance of 21 percent forecast sales to grow, although it was the lowest since last July.