UK Retail sales rise

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U.K. retail sales rose more than economists forecast in February in a rebound from a drop the previous month when heavy snowfall held back consumer activity.

Sales including fuel surged 2.1 percent from January, when they dropped a revised 0.7 percent, the Office for National Statistics said today in London. That was the biggest increase in almost a year and exceeded the 0.4 percent median forecast of 20 economists in a Bloomberg News survey. From a year earlier, sales increased 2.6 percent. The pound strengthened.

The rebound may mask continued weakness in consumer spending as higher energy bills and accelerating inflation squeeze households struggling with weak wage growth. Chancellor of the Exchequer George Osborne, unveiling his latest budget yesterday, sought to boost confidence by cutting the duty on beer, scrapping a planned increase in the levy on gasoline and accelerating an increase in the tax-free allowance on earnings.

“Earnings growth is stunningly weak,” David Tinsley, an economist at BNP Paribas SA in London, said before today’s data. “With inflation rising, that is bad news for the outlook for real disposable income growth and therefore consumer spending.”

The growth in February was led by sales at “other stores” — including computers and jewelry — which rose 5.2 percent. Food sales rose 0.8 percent from the previous month, while clothing and footwear increased 1.5 percent. The statistics office said part of the surge in spending was due to people returning to stores after bad weather in January.

Excluding auto fuel, retail sales increased 1.9 percent in February from January and were up 3.3 percent from a year earlier, the report showed.

Deficit Narrows

In a separate report today, the ONS said Britain had its smallest February budget deficit for five years after the Treasury received proceeds from the Bank of England and the sale of mobile-phone spectrum. The gap excluding temporary support for banks was 2.76 billion pounds ($4.2 billion) versus 11.8 billion pounds a year earlier. The median forecast in a Bloomberg News survey was for a deficit of 8 billion pounds.

The pound extended its advance against the dollar after the data. It was at $1.5187 as of 9:34 a.m. in London, up 0.6 percent from yesterday.

In the retail report, the statistics office said internet sales accounted for 9.7 percent of all spending in February. The average weekly spending online was about 541 million pounds, up 10 percent from the same month a year earlier. Asos Plc (ASC), the U.K.’s largest online-only fashion retailer, said yesterday its domestic performance was “ahead of expectations” in the three months through February. The company is “positive” about the outlook, it said.

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