By Chris Williamson, Director Chief Economist, Markit.
While today's retail sales data came in above analysts' average expectations, it is clear that the retail sector and households are struggling in the face of public sector spending cuts, tax rises and the bumpy economic recovery.
The latest minutes from Bank of England's Monetary Policy Committee meeting highlighted how policymakers were concerned about the possible impact of weak consumer spending on the economy, and these retail numbers will add to these fears. The monthly sales data are very volatile and hard to interpret (a 0.2% increase in March followed a larger than previously thought -0.9% drop in February), but looking at the data over the last three months as a whole shows that sales were up just 0.3% on the previous three months. This is a very lacklustre performance and compares with growth four times as strong when the economy was pulling out of the recession this time a year ago.
While high street sales do not always provide a good indication of consumer spending in general, which accounts for around two thirds of GDP, the data do not bode well for economic growth in the first quarter and suggest that, as suspected by the doves on the Bank of England's MPC, worries about job security, rising prices and falling incomes are likely to subdue the economy in coming months.