UK retail sales surge despite pay squeeze

Business reporter(wp):

Retail sales surged last month, as British consumers enjoyed the warmest April in more than 100 years and shrugged off concerns over falling living standards.

Sales increased by 2.3% last month, according to the Office for National Statistics, more than double the 1% rise forecast by economists.

The stronger-than-expected sales pushed the pound above $1.30 for the first time since last September, as traders brought forward their expectations for an interest rate rise from the Bank of England.

April’s rise was a significant rebound compared with March, when sales fell 1.4%. It was the biggest monthly rise since January 2016 and suggested the retail sector enjoyed a strong start to the second quarter.

The stronger-than-expected figures were at odds with broader expectations of a slowdown in consumer spending this year, as inflation begins to outpace wage growth, putting increasing pressure on household budgets.

“The latest data showed shoppers continued to shrug off any Brexit and political uncertainty with retail sales beating even the most optimistic expectations,” said Richard Lim, chief executive of the consultancy Retail Economics.

“Despite the surge in inflation and squeeze on households’ finances, consumers were out in force during the Easter break with the warm weather driving sales across the sector.”

However, Alan Clarke, an economist at Scotiabank, said he expected to see a consumer slowdown in the coming months, which in turn would weigh on the wider economy.

“With inflation likely to continue accelerating sharply, the headwinds facing the consumer will intensify, which in turn is likely to slow the pace of consumer spending later in the year. We therefore remain of the view that the pace of GDP growth has further downside into the end of the year.”

The rise in April was fairly broad based, with sales in non-food stores up by 2.3% and sales at supermarkets and other food stores up by 1.3%. However, department store sales were down by 0.9%.

The April jump helped retail sales over a broader three-month period grow by 0.3%. This followed a brief period of contraction. The annual rate of growth doubled to 4% from 2% in March.