May 26, 2023
UK Retail Sales Bounce Back More Than Expected After Wet March
(Bloomberg) -- UK retailers saw sales jump more than expected last month, recovering from heavy rain that kept people home the month before.
The volume of goods sold in stores and online climbed 0.5% from March, when sales fell 1.2%, a figure that was revised weaker, the Office for National Statistics said Friday. Economists had expected an increase of 0.3%.
The rebound indicates consumers are surprisingly resilient in the face of a cost-of-living squeeze, with sales gaining in three of the past four months. That puts further pressure on the Bank of England to raise interest rates as it attempts to bring down a stubbornly high inflation rate.
“A rebound in sales reflects recovering consumer confidence, with spending holding up well against the backdrop of recent interest rate rises and sticky inflation,” said Aled Patchett, head of retail and consumer goods at Lloyds Bank.
Sales rose for every category tracked by the ONS except for fuel and household goods. Sales volumes in the three months through April rose 0.8%, the strongest since August 2021.
Consumers spent 16.5% more in April in shops and online than February 2020 as the pandemic was starting, but they took home 0.8% less volumes — paying more to buy less because of the quickest increase in prices in decades. That’s an indication that the economy is bearing up under the weight of inflation still more than four times the BOE’s target.
“Retail sales grew, partially rebounding from a poor weather affected March, with jewelers, sports retailers and department stores all having a good month,” ONS Chief Economist Grant Fitzner said. “Despite continued high food prices, supermarkets also recovered from the fall in March.”
The pound edged higher after the data, rising 0.2% to $1.2346 as of 7:23 am in London.
Investors increased bets on further rate hikes after a shock inflation reading on Wednesday showed price pressures are not subsiding as quickly as hoped. They’re now pricing in a peak of at least 5.5% by September, up from the current rate of 4.5%.
The figures come after an estimated 19.2 million families saw welfare benefits surge by 10.1% in April as the government sought to protect the least-well off from rising food and energy costs.
Erin Brookes, head of retail at Alvarez & Marsal, said the momentum in spending helped along by the Easter holiday should continue into May “with the Coronation and spring bank holidays encouraging more shoppers to spend.”
Consumers received a further boost on Thursday, when the energy regulator announced that gas and electricity prices are set to fall by 17% in July for most British households.
An easing of the squeeze on family budgets has helped to lift consumer confidence. An index compiled by GfK climbed again in May to the highest level since February 2022, shortly before energy and food bills were sent soaring by Russia’s invasion of Ukraine.
--With assistance from Constantine Courcoulas.
(Updates with details from the statement, reaction and the pound.)
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