The Pound traded mixed against major peers on Tuesday after data showed UK retail activity softened in February, although economists say the slowdown may prove temporary.
Pound to Euro (GBP/EUR): 1.15536 (-0.02%)
Pound to Dollar (GBP/USD): 1.34431 (+0.14%)
Euro to Dollar (EUR/USD): 1.16354 (+0.17%)
The latest British Retail Consortium (BRC) survey reported total retail sales growth of 1.1% year-on-year in February, down from 2.7% in January, while like-for-like sales slowed to 0.7%, missing expectations for a stronger increase.
Pantheon Macroeconomics says the disappointing figures were largely driven by poor weather rather than weakening underlying demand.
“Retail sales growth slowed in February as poor weather led shoppers to shun the high street and stay indoors to avoid the rain,” Pantheon said, noting that rainfall in England was around 70% above normal levels during the month.
The consultancy also highlighted a sharp drop in retail footfall, with store traffic falling 4.7% year-on-year, a notable deterioration from January’s modest decline.
Pantheon argues the weather-related weakness should unwind in the coming weeks.
“A weather-driven fall in retail sales growth is more likely to bounce back when the skies clear,” the firm said, adding that sales activity could rebound in March if conditions improve.
Even so, broader risks to the outlook remain.
“Events in the Middle East represent a downside risk to activity,” Pantheon warned, noting that the conflict could dent consumer confidence in the near term before higher energy prices begin to squeeze household incomes.
Breaking down the data, the slowdown was driven mainly by non-food spending, where sales fell 0.4% year-on-year, compared with a 1.7% increase in January. Food sales remained relatively resilient, rising 2.9% annually despite moderating from the previous month.
Pantheon estimates that the BRC figures are consistent with official retail sales volumes falling roughly 1.0% month-on-month in February, reversing part of January’s strong 1.8% surge.
For currency markets, the impact on Sterling has been limited so far. Analysts say investors remain focused on the broader economic outlook and the implications for Bank of England policy in the months ahead.
If the slowdown proves temporary, as Pantheon expects, the data are unlikely to significantly alter expectations for UK growth. However, escalating geopolitical tensions and rising energy prices could present a more meaningful challenge for consumer spending, and for the Pound, later this year.
