UK retail sales jump unexpectedly, but big picture bleak

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Economy2src hours ago (May 20, 2022 05:5srcPM ET)

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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 src.4% month on month after a src.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 202src.

Earlier on Friday, Britain’s longest-running gauge of consumer confidence, the GfK survey, fell to its lowest since records began in src974.

(Graphic: UK consumer confidence falls to lowest since records began in src974, https://fingfx.thomsonreuters.com/gfx/polling/zdvxowrllpx/Pasted%20image%20src653038809537.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 src0% 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 (OTC:) 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.