By Andy Bruce
(Reuters) -British retailers reported the best start to the year since 2021 in what may be a fleeting boost for the economy, with rising bills and the U.S. trade war increasingly weighing on consumer morale.
Retail sales volumes rose by 0.4% in March alone, after downwardly revised growth of 0.7% in February, the Office for National Statistics said on Friday.
A Reuters poll of economists had pointed to a month-on-month fall of 0.4%.
For the first quarter as a whole, retail sales rose by 1.6% - the strongest reading in four years, and providing a 0.08 percentage point boost to overall economic output for the quarter.
That may prove to be a high watermark for Britain’s consumer economy for the foreseeable future.
Earlier on Friday, a closely-watched gauge of British consumer confidence fell in April to its lowest level since late 2023. Market research firm GfK cited rising household energy bills and turbulent global financial markets as reasons for the drop.
"Retailers face an uphill battle to protect margins, sustain investment, and navigate an increasingly complex trading environment," said Nicholas Found, head of commercial content at consultancy Retail Economics.
"The outlook is clouded further by uncertainty around U.S. trade tariffs, which has the potential to disrupt shipments if orders are cancelled and routes impacted."
On Thursday Bank of England Governor Andrew Bailey said he was focused on an expected shock to growth from U.S. President Donald Trump’s import tariffs and retaliatory measures by other countries.
Some of Bailey’s BoE colleagues say the trade war could prove to be disinflationary.
Clothing and outdoor retail chains said good weather helped sales last month, although supermarkets struggled, the ONS said.
The outlook for the rest of the year looks tougher, with household energy bills on the rise and financial markets in turmoil because of the trade war.
Outlook statements this month from major British retailers have been downbeat. Tesco (OTC:TSCDY) and Sainsbury (LON:SBRY)’s, the country’s two biggest food retailers, warned profit growth was unlikely this year amid a potential price war.
Sportswear retailer JD Sports forecast little or no growth even before any potential impact from U.S. tariffs.