Surprise jump in UK retail sales likely to little impact overall negative picture

Unexpected and strong rise in UK retail sales in April cheered overall gloomy picture, but many economist see it just as a temporary phenomenon which is unlikely to be long-lasting.

Monthly retail sales rose by 1.4% in April after declining by 1.2% in March and beat forecast for 0.2% drop, but annualized figure at -4.9% showed the biggest annual drop since January 2021.

Core retail sales which exclude volatile components, also rose in April, registering a 1.4% rise m/m against last month’s 0.9% drop, but fell by 6.1% compared with a year ago, hitting the lowest level since May 2020.

The Gfk report, one of key gauges of consumer confidence, released earlier today, showed that consumer morale fell in May to its lowest since records started in 1974, adding to negative larger picture, as British consumers were hit by further rise in the cost of living due to surging energy prices and higher taxes.

Further negative signals came from the recent release of UK inflation data, which showed inflation hit the highest in four decades at 9%, approaching the BoE’s forecast for a double-digit inflation above 10% later this year.
Overall, the data signal that the UK economy will stagnate in the second quarter, while the outlook for the rest of the year is also pessimistic, with risk of sharp slowdown, particularly in consumer spending.