UK shoppers boost spending despite inflation’s bite in April
Sales volumes in April rose by a slightly strongerthan-expected 0.5% from March when they slumped by 1.2% as unusually heavy rain kept shoppers at home
British consumers picked up the pace of their spending last month and sales volumes over the three months to April grew by the most since mid-2021, according to official data that suggested limited impact from the surge in inflation.
Sales volumes in April rose by a slightly stronger-than-expected 0.5 per cent from March when they slumped by 1.2% as unusually heavy rain kept shoppers at home, the Office for National Statistics said on Friday.
Economists polled by Reuters had forecast a 0.3 per cent rise in April, a month when welfare payments for many lower-income households rose.
In the February-to-april period, sales were up by 0.8 per cent from the previous three months, the biggest such increase since the three months to August 2021.
“April saw a surprising uplit in retail sales despite ongoing inflationary pressures,” Oliver Vernon-harcourt, head of retail at Deloite, said.
“The economic environment remains incredibly tough for many, but consumer confidence is slowly improving from record lows seen in the past year.”
Sterling rose against the US dollar and the euro ater the data was published.
Emma Mogford, a fund manager with Premier Miton Monthly Income Fund, said rising wages were offseting some of the cost-of-living squeeze. “However, any increase in unemployment later in the year could dampen confidence once more,” she said.
Inflation slowed to 8.7 per cent in April from 10.1 per cent in March but that was a smallerthan-expected fall and measures of underlying inflation rose, data published earlier this week showed.
Bank of England Governor Andrew Bailey said on Wednesday that inflation could prove “sticky and stubborn”.
There were some reminders in Friday’s figures of how the cost-of-living crisis is affecting household spending.
Retail sales volumes in April were 3.0 per cent lower than a year earlier. Food sales were down by an annual 2.7 per cent, although that was the second-smallest fall since the end of 2021.
Martin Beck, chief economic adviser to forecasters EY ITEM Club, said the likelihood of more BOE rate hikes would hit the finances of many people on fixed-rate mortgage deals who have not yet been impacted by the climb in borrowing costs.
“On that score, 2.5 million households face a rise in mortgage interest payments during 2023,” he said.
ONS Chief Economist Grant Fitzner said jewellers, sports retailers and department stores all had a good month in April.
JD Sports Fashion has said it expects underlying profit to exceed 1 billion pounds ($1.26 billion) for the first time this year as young shoppers bought more trainers, joggers and hoodies. Marks & Spencer, one of Britain’s best-known retailers, this week forecast modest revenue growth.
“Despite continued high food prices, supermarkets also recovered from the fall in March. However, these were partly offset by a drop in the amount of fuel sold, despite prices also dropping,” Fitzner said.
On a monthly basis, food sales rose by 0.7 per cent ater falling 0.8 per cent in March.
Retailers said there were signs that a wave of strikes by public sector workers in April was partly behind the 2.2 per cent drop in fuel sales volumes in the month, an ONS official said.
Meanwhile UK stocks gained on Friday ater data showed retail sales unexpectedly rose in April, highlighting resilience in consumer spending despite elevated inflation, while miner Rio Tinto posted its best day in more than a month on a brokerage upgrade.
Retail sales volumes rose 0.5 per cent in
April ater a 1.2 per cent fall in March, as per an official report. Sales volumes over the three months to April grew by the most since mid-2021. The pound added 0.2 per cent ater the data. “While the outlook for retail sales appears to be improving, we expect further rises in interest rates, from 4.50 per cent now to a peak of 5.25 per cent,” said Ashley Webb, UK economist at Capital Economics.
“That will mean real consumer spending is more likely to decline later this year than rise.”
The blue-chip FTSE 100 rose 0.2 per cent, boosted by a 3.8 per cent jump in Rio Tinto ater Morgan Stanley turned bullish on the stock.
The broader industrial metals mining sector also climbed 3.1 per cent.
Astrazeneca Plc added 0.7 per cent ater the drugmaker said a combination of its cancer drugs when added to chemotherapy showed positive results in a late-stage trial in patients with advanced or recurrent endometrial cancer.
The FTSE 250 shed 0.2 per cent by 0827 GMT. Both the FTSE indexes are set for weekly declines of more than 2 per cent each, their worst weekly drop in over a month.
Disappointing domestic inflation data and US debt deal uncertainties dominated investor sentiment this week, said Christopher Peters, trading floor manager at Accendo Markets.