UK retail sales bounce back by more than expected in April, new figures show

Ben Chu
Updated
The increase in sales in April was better than the 0.7 per cent increase that City of London analysts had forecast: PA
The increase in sales in April was better than the 0.7 per cent increase that City of London analysts had forecast: PA

Retail sales bounced back from March’s snowstorms by more than expected, according to the latest official data.

The Office for National Statistics reported that sales volumes rose 1.6 per cent in April, following a 1.1 per cent slump in March as the “Beast from the East” hit the UK.

That was better than the 0.7 per cent increase that City of London analysts had forecast.

However, the ONS stressed that the underlying trend “remains subdued”, with retail volumes up just 0.1 per cent on a quarterly basis.

Sterling rose sharply to $1.3409, up 0.46 per cent on the day in the wake of the release, as traders inferred a slightly higher chance that the Bank of England might hike interest rates in August.

The overall economy is estimated to have grown by just 0.1 per cent in the first quarter of 2018, the weakest growth rate in more than five years.

However, the Bank of England believes that the slowdown has been severely exaggerated by the bad weather in the quarter, which disrupted shoppers and construction work.

It believes the Q1 figure will ultimately be revised up to 0.3 per cent and the growth will return to 0.4 per cent in the second quarter, the economy’s estimated trend rate.

Snow’s over

Nevertheless, the Bank held off from raising interest rates in May due to the unexpected weakness of growth.

Retail sales account for around 20 per cent of the economy and are an important barometer of household spending momentum.

“Looking ahead, with employment still rising at a robust pace, real wages on the up again, and consumer confidence high by past standards, we are upbeat about the outlook for consumer spending,” said Andrew Wishart of Capital Economics.

“Overall, this should help the economy to regain some pace in Q2 and further supports our view that the [Bank’s Monetary Policy Committee] will press ahead and hike interest rates in August.”

However, Samuel Tombs of Pantheon took a less optimistic view.

“We continue to expect retail spending to increase only at a glacial rate this year,” he said.

“Consumers’ confidence has weakened and savings intentions have picked up. Both business surveys and vacancy data point to a slowdown in employment growth, while retailers still plan to implement larger-than-usual price rises over the next three months”.