British consumers' appetite for spending may not be enough to save the economy from slipping back into recession in the first quarter, given the unimpressive performance of most of the major sectors, Capital Economics UK Economist Martin Beck said Friday.
Though the consumer spending data provide a positive picture, rising unemployment and an increasingly severe squeeze on real pay would continue to weigh on UK's retail sales in the coming months, which recorded a decline in March, the firm said.
According to the economist, positive retail sales data from other surveys like the one conducted by the BRC were influenced by the impact of March's early Easter, and does not reflect real growth in the sector.
Capital Economics expects that British retail sales will likely bounce back in April as most of February's slump was due to the unusually bad weather experienced across the country. However, despite the unfavorable weather conditions, sales recorded a modest increase in the first quarter.
Latest data from the Office for National Statistics showed that the volume of retail sales decreased 0.7 percent month-on-month in March, after rising 2.1 percent in February. Compared to March 2012, trade in the sector dropped 0.5 percent.
Driving the latest fall, sales of textiles and clothing dropped 3.1 percent sequentially, and trade in household goods fell by 6.2 percent. Meanwhile, food sales rose 0.9 percent month-on-month.
However, even with March's fall in retail sales, spending in the first quarter as a whole increased 0.4 percent from the the preceding quarter.
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