UK retail sales beat expectations despite pick-up in inflation

Volume of goods sold in stores and online increased 2.3 per cent in April

Consumer spending is holding up in the face of increasing food and fuel costs. Photograph: Leonhard Foeger/Reuters

Consumer spending is holding up in the face of increasing food and fuel costs. Photograph: Leonhard Foeger/Reuters

 

UK retail sales beat expectations in April as nice weather prompted Britons to splurge on their homes and gardens.

The volume of goods sold in stores and online increased 2.3 per cent after a 1.4 per cent drop in March, the Office for National Statistics said on Thursday. Economists estimated a 1.1 per cent gain. Average shop-price inflation slowed. The data suggests consumer spending, the mainstay of economic growth, is holding up in the face of rapidly increasing food and fuel costs.

Retail sales had declined for the first quarter in seven years in the three months through March.

Inflation accelerated at the fastest pace since September 2013 in April, and workers are seeing their real earnings fall for the first time in 2½ years. That may be starting to limit pricing power, as annual increases in shop prices slowed to 3.1 per cent from 3.3 per cent.

Retail sales rose 4 per cent compared with the year earlier. Sales excluding vehicle fuel gained 2 per cent on the month. The increase was driven by all sectors except department stores and clothing. The nicer weather particularly drove demand for hardware and household goods, the statistics office said.

The figures are adjusted for the later-than-usual timing of Easter. Bank of England governor Mark Carney last week said that inflation would accelerate faster than previously forecast this year before easing in 2018 as the economy slowed.

He warned of “challenging times” for consumers. Households have in part been financing their spending by saving less and borrowing more, taking advantage of record-low interest rates. They may prove less willing to keep doing that as earnings fail to keep up with inflation.

  • Bloomberg