There was a general wringing of hands on 19 April over the latest monthly retail sales figures published by the ONS (Office for National Statistics) which showed the volume of goods bought flatlined from February to March rather than increasing by 0.3% as expected.

However, when measured on an annual basis rather than a month-on-month basis – which to our mind seems a much fairer comparison – volumes rose by 0.8%, the best result since March 2022, potentially signalling an end to almost two years of decline.

When measured on a value basis – taking into account the total amount of pounds spent rather than the number of items bought – the increase on March 2023 was 3.3%, or 3.4% excluding fuel sales, continuing a run of positive year-on-year growth dating all the way back to February 2021.

So why all the gloom? Admittedly there are some areas of retail sales which are seeing a steady decline in sales in value terms – household goods in general being a good example, and in particular furniture, lighting and electrical goods – yet there other areas which are growing such as clothing and hardware (which we read as positive for our call on DIY retailer Kingfisher (KGF)).

Even in volume terms, sales in the three months to March were up 1.9% marking the fastest quarterly growth since 2021 and prompting Alex Kerr of Capital Economics to declare the retail recession ‘at an end’ in a quote for the Financial Times.

It would be premature to celebrate victory, however, as the latest PwC Consumer Sentiment survey shows.

Although confidence is improving and consumers say they feel better off, there is ‘a slight decoupling between improved household finances and spending intentions’ according to the authors with 70% of consumers planning to cut back on spending in the next three months.

Despite falling inflation, a resilient job market and wage growth and the reduction in national insurance leading to improved finances, especially for the 25 to 44 age group, confidence is still lacking with the authors pointing to a ‘spending hesitancy’ among consumers, especially for big-ticket items.

Spending priorities vary across age groups, with 18 to 24 year-olds favouring health, wellbeing and clothing, 25 to 34 year-olds pet food and care and home improvements and 35s and over thinking about holidays once their children are taken care of, according to the survey. 

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