Warmer weather and falling UK inflation lift retail sales

Spending in shops and online bounced back strongly last month as better weather, falling inflation and rising consumer confidence boosted spending.

The monthly update from the Office for National Statistics showed the volume of retail sales rose by 2.9% in May, after a weather-affected drop of 1.8% in April.

The ONS said most retailers had a better month in May, with marked increases in the clothing and footwear and household goods sectors. Clothing sales rose by 5.4% as retailers managed to shift summer stock.

The official data followed the release of the latest snapshot of consumer confidence from GfK showing sentiment standing at its highest level in two and a half years.

Over the three months to May – a better guide to the underlying trend in spending – retail sales rose by 1%. Even so, they remained 0.5% below the level immediately before the start of the Covid-19 pandemic in February 2020.

Retail sales account for less than half of total consumer spending and exclude categories such as car sales, eating out and hotel stays.

Rob Wood, the chief UK economist at Pantheon Macro, said: “Retail sales rebounded strongly from April’s rain-sodden disaster and will keep gaining ground as consumers’ real wage growth drives higher spending.

“The incessant rainfall didn’t stop in May but precipitation was “only” 20% above average, compared to 68% above in April. May was also the warmest since at least 1884.”

Andrew Wishart, a senior UK economist at Capital Economics, said the fact that online sales were up by 5.9% on the month suggested there was more to the May increase than simply better weather attracting shoppers back to high streets.

“Overall, the retail sales data for May showed tentative signs that strengthening real income growth now inflation is back at target is feeding through to stronger spending,” Wishart said.

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Separate ONS figures highlighted the size of the fiscal challenge facing the next government, with the gap between public spending and tax receipts standing at £15bn last month – £800m higher than a year earlier and the third highest for a May since modern records began in 1993.

Spending last month was £2.3bn higher than in May 2023, while a £1.5bn increase in tax receipts was partly offset by weaker national insurance contributions following the cuts in the Autumn statement and the budget.

May’s £15bn borrowing figure was slightly lower than the £15.7bn forecast by the Office for Budget Responsibility, the government’s spending watchdog. April’s borrowing was revised down by £2.1bn to £18.4bn.


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