Yahoo Finance UK retail sales rise in April despite inflation squeeze
Retail sales pushed higher in April despite the surge in inflation squeezing household finances and threatening to push the UK into a recession.
The quantity of goods bought in Great Britain rose by 1.4% in April, following a fall of 1.2% in March, the Office for National Statistics (ONS) reported. This is better than the 0.2% fall economists had expected.
The increase was driven by strong supermarket sales, while clothing also performed well as consumers spent a bit more ahead of summer holidays and weddings.
Sales volumes at alcohol and tobacco stores jumped 8.4% over the month.
“April’s rise was driven by an increase in supermarket sales, led by alcohol and tobacco and sweet treats, with off-licences also reporting a boost, possibly due to people staying in more to save money,” said Heather Bovill, ONS deputy director for surveys and economic indicators.
Read more: UK economic growth falls in April as inflation hits demand
“Clothing sales had a strong month, especially online, with some retailers suggesting consumers were purchasing clothes for summer holidays and weddings,” she added.
Non-store retailing sales volumes, which are predominantly sales from online-only retailers, rose by 3.7% led by stronger clothing sales.
But the numbers still reflect a wider downward trend, with retail sales falling 0.3% in the first quarter. Compared to last year, April’s sales were down 4.9%.
Maxim Syn, head of desk at global financial services firm Ebury, said despite a positive April the figures continued to show a longer-term downward trend and showed the difficult path the Bank of England must tread as the economy flirts with recession.
“Longer-term downward trends remain a concern as companies pass on high energy and raw material costs to consumers, inflating prices at the checkout," he said.
“Household energy bills are also soaring, paving the way for a difficult winter ahead, with many people likely to begin tightening the purse strings in an attempt to weather the cost of living crisis if they haven’t done so already.
Read more: Number of people working from home triples since COVID pandemic
“Evidently the Bank of England will have to weigh up the gloomier economic outlook as the War in Ukraine and surging inflation weighs on growth with the need to counter these inflationary pressures by raising interest rates. While the Bank is stuck between a rock and a hard place, with the MPC expecting inflation to peak in excess of 10% in the coming months, we think further rate hikes are inevitable.”
The retail sales report also shows the impact of inflation, particularly the jump in petrol and diesel.
Shoppers spent 4.5% more in April than a year ago, but ended up with 4.9% less stuff.
Andrew Sentance, senior adviser at Cambridge Econometrics and a former Bank of England policymaker, says it shows consumers are being squeezed.
Retail sales volumes in past 3 months just 1 percent up on a year ago, despite the fact that the value of spending is up 10 percent. The impact of 9pc inflation squeezing consumer spending very clear from these latest retail sales figures.
— Andrew Sentance (@asentance) May 20, 2022
UK inflation jumped to 9% in the 12 months to April, up from 7% in March and the highest level it has reached since 1982.
Earlier this Friday, Britain's longest-running gauge of consumer confidence, the GfK survey, fell to its lowest since records began in 1974.
