Sales increased 0.5 percent from January, when they fell a revised 1.6 percent, the Office for National Statistics in London said today. The reading exceeded the median estimate in a survey of 35 economists by Bloomberg News for a 0.4 percent increase. Annual sales growth was 2.1 percent, up from a revised 1.2 percent in January.
The Bank of England is counting on stronger spending by consumers, who account for two-thirds of the economy, to spur expansion after the slowest growth in 13 years in 2005. Increased borrowing and higher home prices helped sales at stores including John Lewis Partnership Plc, even as unemployment climbed.
"We are seeing a gentle recovery going on in retail sales at this stage, which I expect to get stronger going forward,'' said James Carrick, an economist at ABN Amro in London. "The pickup in the housing market should have a general wealth effect, making consumers happier to go out and spend.''
The gain in sales in February was led by clothing and footwear, which rose 3 percent, the first increase since November. Food sales gained 0.5 percent.
John Lewis Partnership, owner of the largest chain of U.K. department stores, said March 9 sales growth accelerated in the first five weeks of its fiscal year, which began Jan. 29.
"We've already seen something of a turn,'' Charlie Mayfield, managing director of the London-based company, said in an interview that day. While consumer spending "hasn't bounced back yet,'' a slowdown has started to "flatten out,'' he said.
ABF's Primark
Associated British Foods Plc, the owner of Primark clothing stores, said Feb. 27 business in the last 11 weeks was a ``little ahead'' of the same period last year, led by gains at the discount apparel chain.
The central bank predicted Feb. 15 that a ``steady expansion'' in consumer spending will lift economic growth to at least 2.7 percent this year from 1.8 percent in 2005, and inflation will remain near the 2 percent target.
The economy grew 0.6 percent in the fourth quarter, the fastest pace in a year, driven by increased household spending and an expansion in services. U.K. house prices rose for a fourth month in February by the most in more than a year and a half, the Royal Institution of Chartered Surveyors said today.
Bank of England figures on March 1 showed consumer debt reached a record 1.17 trillion pounds ($2.05 trillion) in January. Credit-card borrowing more than tripled to 733 million pounds.
Policy maker Stephen Nickell, who has called for a reduction in the benchmark 4.5 percent interest rate, says the bank's projection for consumer spending is too optimistic and swelling unemployment will damp inflation.
Rise in Jobless
Jobless claims jumped the most in 13 years last month, the statistics office said yesterday.
Business surveys were mixed last month as the British Retail Consortium reported a gain in sales and the Confederation of British Industry said they fell.
Today's figures showed one area where sales are still declining was in household goods, including furniture. They slid 1.1 percent in February.
MFI Furniture Group Plc, the U.K.'s largest furniture retailer, announced a 12 percent reduction in its workforce on Feb. 28, after sales at stores open a year or more slid 5.1 percent last year.
"We might not see retail sales numbers that are that strong yet, but they will pick up toward the end of the year,'' Carrick said.
Investors have reduced bets on a reduction in borrowing costs this year, with the implied rate on the interest-rate future maturing in December at 4.7 percent before the report, up from 4.47 percent at the end of last year.
