Petrol panic, sunshine may keep UK from recession

Saturday, 21 April 2012 00:35 - - {{hitsCtrl.values.hits}}

LONDON (Reuters): Warm weather and fears of a fuel shortage helped drive the biggest increase in British retail sales in more than a year in March, raising chances that recovering consumer spending may have helped the economy to avoid recession.

The unexpectedly strong figures will come as a relief for policymakers as they try to boost fragile growth at a time of sticky inflation, deep austerity measures and weak wage rises.

Figures due out next Wednesday will confirm whether Britain’s economy avoided slipping back into recession at the start of this year after contracting by 0.3 percent at the end of 2011.

The Office for National Statistics said retail sales volumes rose 1.8 percent on the month to give an annual rise of 3.3 percent. They were both the highest increases since January 2011 and both beat forecasts.

The pound rose on foreign exchange markets and British government bonds fell after the data was released.

“The government will be breathing a sigh of relief...it looks like the first quarter might squeak out a small positive expansion in output,” said David Tinsley, economist at BNP Paribas.

Unusually warm weather in March helped drive up sales of clothing and footwear, as well as gardening products, the ONS said, while the threat of a strike by British fuel tanker drivers prompted panic-buying in some parts of the country, leading to long queues at petrol stations.

There was a 4.9 percent rise in fuel sales on the month, the biggest rise since January 2011. However, some smaller outlets reported losing trade because they had run out of fuel and had to close.

Retail sales volumes rose by 0.8 percent in the first quarter compared to the previous three months.

News from major British retailers out this week has painted a patchy picture of the sector.

Retail bellwether John Lewis said on Friday its department store sales rose 13.9 percent on the year in the week to April 14.

Debenhams, the country’s second-biggest department store group, surprised markets with broadly flat profits and sounded positive about the coming months, while sales at Britain’s biggest clothing retailer Marks & Spencer Plc disappointed after it ran out of best-selling lines.

By contrast, supermarket giant Tesco has slashed expansion plans for its main British chain. The retailer has suffered more than some rivals in part because it sells more discretionary goods like homewares, where shoppers have been cutting back the most.