Retail sales rebound for smaller businesses

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Independent’s enjoy higher footfall for March ahead of royal wedding.

UK retail sales at independent or small-sized stores have seen an unexpected rebound in March, says data from the Office for National Statistics (ONS), with sales volumes rising 0.2 percent compared with a month earlier.

The ONS said in its recently released retail sales bulletin that sales were up 1.3 percent compared with March 2010 on a seasonally adjusted basis – which takes account of the fact that Easter fell in March last year.

Independent and high street retailers have reported higher footfall. "There is some talk that the high cost of petrol is leading some people to cut back on driving to the out of town shopping centres and supermarkets and do more shopping locally", said Howard Archer, economist at IHS Global Insight.

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The ONS estimates that internet sales now comprise 9.8 percent of all non-fuel retail sales in the UK by value.

The rise in sales has caught the market by surprise – instead of a 0.2 percent rise, economists had expected a month-on-month fall in sales of 0.5 percent.

Sterling jumped half a cent against the dollar after the data was released, as currency traders priced in a higher probability that the Bank of England will raise rates over the summer, and went on to hit a 16-month high of $1.657.

"The consumer is not quite as flat on his back as had been feared," added Archer. However, he pointed out that despite the modest pick-up in sales and slowdown in price rises in the month, consumers were still seeing their incomes squeezed by inflation, further adding: "the underlying impression remains that consumers are less able and willing to spend."

He also noted that consumer spending for the first quarter of the year as a whole had only risen 0.3 percent versus the previous three months, which did not bode well for the economy, as retail sales comprise 65% of all spending.

Nevertheless, a so-called ‘mixed picture’ has been reported, due to the number of smaller shops doing well, in particular those selling gifts or jewellery related to the royal wedding. 

The ONS data showed smaller stores doing better than bigger ones compared with a year ago, particularly in the food sector where small stores gained 2.5 percent.

The ONS figures come after supermarket giant Tesco revealed earlier this week a 0.7 percent drop in UK like-for-like sales in the three months to 26 February, while Home Retail Group reported shrinking markets for its Argos and Homebase chains, and predicted another tough year in 2011.

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