Retail sales in worst slump for nearly seven years: ONS

Retail sales have been suffering their worst slump in nearly seven years as inflation bites - despite a partial bounce-back last month.

According to official figures, sales volumes grew by a better-than-expected 1.4% in February but the underlying pattern pointed to the impact of higher fuel prices eating into shoppers' disposable income.

For the three months to February, sales were down by 1.4%, the worst decline since March 2010, according to the Office for National Statistics (ONS).

The figures point to the difficulty facing high street retailers and come as Next (Frankfurt: 779551 - news) reported its first decline in annual profits since 2009.

Figures earlier this week showed inflation at a three and a half year high in February as the collapse in the pound since the Brexit vote, which makes imports more expensive, fed through to prices.

ONS senior statistician Kate Davies said: "February's retail sales figures show fairly strong growth, though the underlying three month picture shows falling sales.

"The underlying trend suggests that rising petrol prices in particular have had a negative effect on the overall quantity of goods bought over the last three months."

The ONS data showed average prices at petrol stations were up 18.7% on the same month last year.

Spending by shoppers was robust in the months following last June's Brexit vote but more recently there have been signs of retail sales wilting.

Bank of England governor Mark Carney has suggested that the consumer-led economic expansion seen in the aftermath of the referendum could fizzle out.

The month-on-month rise in February was the first after three months of declines.

HSBC economist Liz Martins said: "For the optimists, the fact that this bounce was considerably stronger than expected may suggest the slowdown over the winter months was temporary, and the UK consumer remains in good shape.

"For the pessimists, the fact that volumes fell at their fastest three month-on-three month rate since 2010 will put a dampener on the better news.

"We remain cautious."

Howard Archer, chief UK and European economist for IHS Markit (Stuttgart: A1139A - news) , said: "The economy's persistent resilience since last June's Brexit vote has been largely built on consumers keeping on spending.

"With (Other OTC: WWTH - news) consumers now seemingly moderating their spending, the long anticipated slowdown in the economy looks set to materialise unless other sectors can make significantly increased contributions."