Non-food sales values up 6.7% for the month, with stronger demand expected to drive growth in Q2.
Figures released by the Office of National Statistics (ONS) today revealed an overall growth in retail sales value of 4.4% in March 2010 compared with the same month last year and a 2.2% increase in sales volume.

Predominantly non-food stores saw a 6.7% uplift in values, with 'other' stores within the non-food sector reporting the largest increase of 9.4% and non-specialised stores up 8.8% last year. Household goods stores also fared well with a 6.6% boost in sales values, while textile, clothing and footwear stores reported a 208% increase on last year.

The Synovate Retail Think Tank (RTT) reported that the state of retail health in Q1 improved for the second quarter in a row, as it had predicted, with the Retail Health Index edging up one point to 85. It believes that stronger demand will be the key driver of improved health in Q2. Synovate's Tim Denison said: "We shouldn't underestimate how bad January was; because of poor weather, low stocks of sale goods and the VAT increase. Since then, trading figures have become stronger, albeit quite disparate, turning the quarter around. Shoppers haven't simply sat on their hands, but have shopped strongly into spring."

Non-food stores also saw the highest increase in sales volumes in March, with non-specialised stores up 8.7%, other stores up 7.6% and household goods rose 5.5%. Textile, clothing and footwear stores saw a 5.4% increase in sales volumes for the month.

Pressure on margins was a key driver of deterioration in retail health in 2009. However, according to the RTT, margins had a neutral impact on retail health in Q1, with the hit of the VAT hike passed on to suppliers and consumers. The neutral impact is expected to continue in Q2. Barclays head of retail and wholesale Richard Lowe commented: "Retailers have 'played a blinder' forcing much of the pain of exchange rates upstream to suppliers and higher prices downstream to buyers. Many retailers pre-planned the VAT rise, thus neutralising its impact. Despite many retailers' reliance on the Far East, the impact of the weak pound has largely worked its way through now ad the hit has been absorbed."

The positive trend in retail is expected to continue, although the second half of the year remains a cause of concern to the RTT. KPMG's Helen Dickinson explained: "Retailers somehow managed to navigate their way successfully through the wintry weather, the VAT rise and the economic uncertainties in Q1. The big issue is whether pre-election jitters will trigger a downturn. The RTT believes there is no reason for this to happen, but it will be only a matter of time thereafter when the tough decisions on the public deficit will begin to take their toll. For example, given that none of the political parties have ruled out a rise in VAT this could impact the sector before autumn."

Looking to the rest of the year, Barclays' Mr Lowe concluded: "Following a volatile start to the year, March's figures offer hope that a more stable landscape is emerging in the retail sector, with retail sales volumes up both month on month and year on year, broadly in line with expectations.


"Retailers will be keeping a close eye on consumer confidence following its recent reported dip. However, at present sales are not declining with confidence levels, despite rising unemployment and increasing inflationary pressure on household incomes. As the nation prepares to go to the polls, retailers will be hoping for the extension of various economic stimulus measures currently in place, particularly the historically low base rate."