UK retailers saw sales jump more than expected in April, recovering from heavy rain that kept people home the month before.
(Bloomberg) — UK retailers saw sales jump more than expected in April, 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 drop that was even larger than initially thought, 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. Excluding fuel, volumes jumped 0.8%. Sales from February to April were up 0.8%, the strongest three-monthly gain since August 2021.
What Bloomberg Economics Says …
“UK retail sales remains under pressure despite rebounding in April. Elevated inflation is continuing to chip away at consumer spending power. That will be compounded going forward, as the full impact of higher interest rates is yet to feed through the economy.”
—Niraj Shah, Bloomberg Economics. Click for the REACT.
Consumers spent 16.5% more in April in shops and online than in February 2020 as the pandemic was starting, but they took home 0.8% fewer goods — paying more to buy less because of the quickest increase in prices in decades.
“Retail sales grew, partially rebounding from a poor weather affected March, with jewelers, sports retailers and department stores all having a good month,” said ONS Chief Economist Grant Fitzner. “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 sales 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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