UK retail sales suffer worst quarter in a year after March snow

British retail sales recorded their biggest quarterly fall in a year during the three months to March, after unusually cold and snowy weather kept shoppers at home.

Retail sales volumes in March were 1.2 percent lower than the month before as a period of unseasonal snow and cold weather dubbed 'The Beast from the East' kept shoppers at home, a bigger fall than economists had expected in a Reuters poll.

For the first quarter as a whole, sales volumes dropped by 0.5 percent compared with the last three months of 2017, their biggest quarterly fall since the first quarter of 2017.

This is likely to trim gross domestic product growth in the first quarter by 0.03 percentage points, the ONS said.

However, the data may not cut much ice with the Bank of England, which last month said it expected the wintry weather to slow overall economic growth temporarily but not affect an underlying picture that pointed towards higher interest rates.

Other data this week - including slower-than-expected wage growth and a surprise drop in inflation - cast a small amount of doubt over what economists had seen as a near-certain BoE rate rise next month, only the second since the financial crisis.

But the BoE is likely to stick to its view that the labour market is primed for a pick-up in wages, as unemployment is at a 42-year low, leading to stronger consumer demand later this year as inflation continues to fall.

The ONS said automotive fuel sales fell particularly sharply in March, but that department stores reported strong online demand, especially in the run-up to Mother's Day and Easter.

It said there was anecdotal evidence that food shoppers switched away from supermarkets to smaller local stores.

Britain's economy underperformed its rivals last year as higher inflation - caused by the fall in the pound since June 2016's Brexit vote - hurt the consumers' spending power, though forecasts for a sharp downturn proved too pessimistic.

On Tuesday the International Monetary Fund nudged up its forecast for British growth this year, but still predicted sub-par growth.

Compared with a year earlier, March sales volumes were up 1.1 percent, the ONS said, versus expectations of a 2.0 percent rise.

Official data earlier this week showed British inflation fell to 2.5 percent from 2.7 percent, its lowest in a year and below BoE forecasts.

The gauge of inflation used in the retail sales data, the retail price deflator, sank to its lowest since January 2017 at 1.9 percent in March.

The ONS said that retail sales in cash terms recorded their weakest annual growth since June 2016, expanding by just 3.0 percent.

British retail chains - whose profits typically hinge on cash spending rather than volumes - have had a tough few months.

Earlier on Thursday department store Debenhams warned about its full-year profit outlook for the second time in four months after its first-half profit more than halved.

Major flooring retailer Carpetright said last week it would seek creditor approval for a restructuring plan to close nearly a quarter of its stores, and Toys R Us UK and electrical store Maplin closed their doors before.

But others such as online fashion retailer ASOS and discount clothing chain Primark have done better.