Official figures due out this week will show whether the UK economy avoided falling back into recession in the first quarter of the year after a surprise 0.5% decline in GDP in the last three months of 2010.
Latest retail sales figures released on Thursday showed a small month-on-month increase of 0.2% in March following a fall of 0.9% in February, although year-on-year sales growth was 1.3% – better than forecast after a downbeat assessment by the British Retail Consortium (BRC) last week.
However, BRC director general Stephen Robertson said: “The figures confirm a worrying downward trend. Annual growth in sales values is one quarter of what it was in January and the worst since April last year.”
The figures are important as they have a significant bearing on GDP – retail sales comprise 65% of all UK spending – which will, in turn, count towards the decision on whether to raise interest rates by the Monetary Policy Committee of the Bank of England.
Robertson said the retail figures for this April would be helped by Easter and the Royal Wedding, but he described UK economic conditions as “fundamentally weak” and said these were “likely to undermine consumer confidence for some time”.
Economists have predicted UK economic growth of 0.6%-0.7% in the quarter to March. However, UK consumer spending in the first quarter of the year rose only 0.3% on the last quarter of 2010.
The Office for National Statistics (ONS), which released the retail figures, noted that small retailers did better than large stores in the last month – a trend first noticed in January. This may be due to the rise in the cost of petrol hitting out-of-town retail parks and shopping-centre stores.