UK retail sales unexpectedly rose in February, sterling climbs

Investing.com -- British retail sales unexpectedly climbed by 1% in February, driven by stronger demand at department stores and higher spending on clothing and household goods.

Data released on Friday by the Office for National Statistics (ONS) revealed that the volume of goods purchased surpassed economists’ expectations of a 0.4% decline, as forecast by a Reuters poll. However, the February increase was lower than the 1.4% gain recorded in January.

Over the three months to February, retail sales rose 0.3% compared to the previous three-month period, suggesting that consumer spending remained resilient despite sluggish economic growth and subdued confidence.

The British pound briefly gained ground on Friday after stronger-than-expected data.

Sterling touched a session high against the dollar of $1.2969 following the release, before slightly easing to $1.2956, remaining largely flat on the day. Meanwhile, the euro edged down 0.08% against the pound, maintaining levels seen prior to the data.

Supermarket sales volumes, which had risen sharply in January, declined in February, weighing on overall performance.

In a separate release on Friday, data confirmed that the UK economy grew by just 0.1% in the fourth quarter of 2024, underlining the challenge for the Labour government in fulfilling its pledge to reinvigorate the economy.

Revised figures showed the economy expanded by 1.1% for the year, slightly ahead of the initial 0.9% estimate, following a modest 0.4% growth in 2023. However, momentum remains weak, with the Office for Budget Responsibility (OBR) cutting its 2025 growth forecast to just 1% earlier this week.

The ONS also reported that real GDP per head fell by 0.1% in the final quarter of 2024, consistent with previous estimates, and remained flat over the year.