Retail Sales Bite Back
Posted by Nicola Mallett on
The Office for National Satistics said retail sales volumes rose 3.5% in May, the fastest monthly increase on record, and well above forecasts for a slight downturn. That took the less volatile quarter on quarter growth rate to 1.8%, and meant sales over the last three months were 5.4% higher than in the same period a year earlier.
The figures are a sharp contrast with the downbeat tone of recent trading updates from retailers such as J Sainsbury and Woolworths, and with other surveys suggesting consumers were cutting back on non-essentials as they felt the bite of higher fuel and energy bills.
But the British Retail Consortium also reported evidence of a surge in spending in May, which it attributed to a short-term burst of optimism as the weather improved. Richard McGuire, strategist at RBC Capital Markets, said better weather could have prompted a spurt in sales of seasonal food. Even if this was short-lived, he added, it would be “decidedly uncomfortable reading” for the Bank, “given its evident dependence on slowing growth to ensure consumer price inflation returns to target.”
“What this number does tell us - conclusively - is that the consumer isn’t slowing,” said Neville Hill, economist at Credit Suisse. “It may not be quite as strong as these numbers suggest, but it’s certainly not weak.”
Share