Charity shops and home cooking boost hopes of retail recovery

CHARITY shops and home cooking boosted retail sales last month, propelling them back to pre-pandemic levels.

Retail sales volumes rose by 1.2pc in February, according to the Office for National Statistics (ONS), surpassing the consensus forecast of a 0.2pc increase and raising hopes that the two-year decline in sales volumes is over.

Shoppers are changing their habits in response to the cost of living crisis.

Non-food sales soared by 2.4pc over the month, driven by strong sales in discount stores.

Food store sales rose by 0.9pc, following an increase of 0.1pc in January, but the ONS noted anecdotal evidence that this reflected a shift to home cooking and reduced spending in restaurants and on takeaways.

More spending in second-hand stores, such as auction houses and charity shops, also drove up other non-food stores sales by 1.7pc. On an annual basis, volume of sales was still down by 3.5pc, but the value of purchases rose by 5.5pc, reflecting high inflation.

Jacqui Baker, head of retail at RSM UK, an accountancy firm, said: “Consumers are making the choice to trade down to make their money go further.”

But last month’s jump was the second consecutive monthly increase after a fall in December, and is a clear sign of green shoots in the economy.

Martin Beck, chief economic adviser to the EY Item Club, said the signs of strength increase pressure on the Bank of England’s Monetary Policy Committee (MPC) to continue raising rates.

Mr Beck said: “With the MPC placing a renewed focus on the strength of activity and the tightness of the labour market, strong out-turns like these raise the chances that some members might vote for another increase in interest rates in May.”

But analysts warned that the recovery in retail sales is unlikely to be maintained.

Ashley Webb, of Capital Economics, said: “We doubt this will last as the drag on activity from higher interest rates intensifies this year.”

She added: “At face value, these figures further add to the view that the recent resilience in activity is still holding up. But when households’ finances are under pressure, it is possible that any improvement in retail sales will just be met by a softening in non-retail spending.”

Of the four main categories, only fuel saw a month-on-month fall.

Car fuel sales fell by 1.1pc in February, following a 1.1pc rise in January. This is because rail strikes may have increased car travel at the start of the year, the ONS said.