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UK retail sales jump unexpectedly, but big picture bleak

Economic Indicators May 20, 2022 22:50
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2/2 © Reuters. FILE PHOTO: People carry Primark shopping bags after retail restrictions due to coronavirus disease (COVID-19) eased, in Belfast, Northern Ireland, May 4, 2021. REUTERS/Clodagh Kilcoyne 2/2

By Andy Bruce

LONDON (Reuters) - British retail sales jumped unexpectedly in April as shoppers loaded up on alcohol and tobacco, likely a blip in an otherwise bleak trend that has driven consumer confidence to all-time lows amid a worsening cost-of-living crunch.

Retail sales volumes rose 1.4% month on month after a 1.2% drop in March, the Office for National Statistics said. Economists polled by Reuters had expected a 0.2% monthly fall.

The wider picture remains disconcerting. Retail sales in the three months to April fell 0.3%, after a 0.7% drop in March. Compared with a year ago, sales volumes were 4.9% lower, marking the biggest annual drop since January 2021.

Earlier on Friday, Britain's longest-running gauge of consumer confidence, the GfK survey, fell to its lowest since records began in 1974.

(Graphic: UK consumer confidence falls to lowest since records began in 1974, https://fingfx.thomsonreuters.com/gfx/polling/zdvxowrllpx/Pasted%20image%201653038809537.png)

British consumers were hit last month by a double whammy of surging household energy costs and higher taxes, and data published this week showed inflation hit a 40-year high of 9.0%.

The Bank of England thinks inflation will climb above 10% later this year.

"So far, the conflicting signals coming from the data are consistent with our call that the UK will stagnate in Q2," said economists from Berenberg Bank.

Sterling was little changed against the dollar after the data.

The ONS said food store sales rose by 2.9% in April, largely driven by strong sales of alcohol, tobacco and 'sweet treats'.

This was "possibly due to people staying in more to save money," ONS statistician Heather Bovill said.

Online clothes sales also did well as people got ready for summer holidays and weddings, she added.

Leading supermarket groups including Tesco (LON:TSCO) and Sainsbury's have warned of lower profits this year and Premier Foods, the maker of Mr Kipling cakes and OXO stock cubes, said it would raise prices of its products.

"Overall (the data) will still leave the BoE in the same bind, behind the curve on inflation, but fretting over a potentially sharp slowdown, above all in consumer spending," said Marc Ostwald, chief economist at brokerage ADM Investor Services.

UK retail sales jump unexpectedly, but big picture bleak
 

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David Hawley
David Hawley May 20, 2022 7:41
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so where's the inflationary pressures the BoE is talking about? A 1% drop in retail sales over the past two months and consumer confidence at its lowest level since 1974. Yet the BoE want to keep raising rates until inflation falls. Inflation will not fall until the price of energy falls. this is a Government problem not the BoE's.
 
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