UPDATE 1-Cold weather hurts British retail sales

Thu Apr 18, 2013 4:59am EDT

By David Milliken and Olesya Dmitracova

LONDON, April 18 (Reuters) - Unusually cold weather hurt British retail sales in March, but the fall was small enough to leave the possibility that the economy as a whole avoided shrinking in the first three months of the year.

Retail sales volumes slipped 0.7 percent on the month after strong growth in February to stand 0.5 percent lower on the year, the Office for National Statistics said on Thursday.

The broader picture for British consumers is still weak, with spending under pressure from inflation that is outstripping meagre wage growth.

But Thursday's data did show that retail sales were 0.4 percent higher in the first three months of 2013 than the last three months of 2012. This suggests Britain's economy may have eked out modest growth in the first quarter of 2013, which it needs if it is to avoid its third recession in less than five years.

"For Q1 as a whole, the numbers were marginally positive, so that gives us some hope that we may be able to avoid a contraction in Q1 GDP," said Peter Dixon, economist at Commerzbank.

There was little immediate market reaction to the data, which was broadly in line with expectations.

Economists had expected a fall in retail sales volumes, following strong growth in February due to a rebound from earlier snowy weather, and the ONS said that the coldest March since 1962 seemed to have kept shoppers at home.

Non-food sales fell 4.0 percent in March, their biggest monthly drop since January 2010, and this was only partly offset by the biggest rise since March 2009 in the smaller 'non-store retailing' category, which includes online shopping.

"Feedback from department stores, clothing stores and household goods stores suggested that sales were dampened by the weather, as they prepared their stores for the spring season," the ONS said.

Britain's second-biggest department store group Debenhams said on Thursday that January snow had contributed to a fall in profit in the six months ending in early March and forecast better trading in the coming months.

Earlier figures from the British Retail Consortium had painted a relatively rosy picture, with 3.7 percent annual growth in the value of retail sales in March. But the ONS said the value of retail sales was up just 0.1 percent on the year.

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