Faster than expected pick up in UK retail sales
Improved weather condition, lower inflation and special sales promotion helped U.K. retail sales, including of vehicle fuel, recover at a faster pace than expected in May, latest government data released Thursday revealed.
As against expectations of a 1.2 per cent rise in retail sales, the volume rose 1.4 per cent from the previous month, when it was down 2.4 per cent due to a bad wet spell in April, the Office for National Statistics said.
Even annual growth recorded a 2.4 per cent rise, offsetting April's 1.1 per cent drop and also exceeded the consensus forecast of 2.1 per cent.
"The end of weeks of relentless rain and the build-up to the Jubilee gave a useful boost in May, but retailers tell us the effect was largely confined to the final week of the month when the sun came out and so did shoppers, " said Stephen Robertson, director general of British Retail Consortium (BRC).
"Retail competition has helped push inflation down to a two-and-a-half year low, which is a good sign that pressures on household budgets are easing. But incomes are still dropping in real terms and customers' underlying lack of spending power remains a big problem," stated Robertson.
Consumer price inflation slowed to 2.8 per cent in April, reducing the squeeze on household income. However, the weak economic outlook is undermining consumer sentiment.
Despite that the decent retail sales growth in May gives a limited lift to the recent rapidly dwindling hopes that the economy can avoid further contraction in the second quarter, said IHS Global Insight's economist Howard Archer.
Food store sales grew 1 per cent from a year ago, while non-food store sales advanced 3.3 per cent. Non-specialized stores sales volumes advanced 11.3 per cent, the biggest increase since January 2000. On the other hand, clothing and footwear sales were down 1 per cent.
Excluding fuel, retail sales volume rise at 0.9 percent month-on-month, after declining 1.1 percent in the previous month, was better than expectations.
Sales expanded 3 per cent annually, erasing a 0.3 percent per cent fall seen in April and better than the 2.7 percent increase forecast by economists.
The economy fell into a double-dip recession in the first quarter of 2012. To prevent the retail sector from making a negative contribution to GDP growth in the second quarter, sales volume needs to grow by at least 1 per cent or so in June, Samuel Tombs at Capital Economics said.
Given the extent of economic uncertainty, the economist said consumers will remain reluctant to increase their spending on the high street for the remainder of this year.
Source: Britain News.net
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