British retail sales experienced a significant uptick in May, bouncing back from a previous decline in April, according to official figures released on Friday. Sales volumes saw a notable increase of 2.9% in May, following a revised 1.8% drop the previous month. This surge in sales provided a slight relief for Prime Minister Rishi Sunak as the country gears up for the July 4 election.
Sales Volumes Rise:
Economists had predicted an average increase of 1.5% in sales volumes for May, but the actual figure surpassed expectations, marking a 2.9% rise. In comparison to the previous year, May's sales volumes were 1.3% higher, despite a 2.3% dip in April, yet still lingering 0.5% below pre-pandemic levels in February 2020.
Potential Distortions:
The Office for National Statistics (ONS) highlighted that yearly sales growth might be distorted by an additional public holiday in May 2023 to commemorate King Charles' coronation. Consumer markets specialist Lisa Hooker from PwC cautioned that once factors like the extra trading day, employee payroll tax reductions, and minimum wage hikes were considered, the strength of May's sales growth was actually less significant than initially perceived.
Consumer Spending:
The data indicated that sales volumes surged across various sectors in May, with clothing retailers and furniture stores particularly resilient following adverse weather conditions in April. The positive sales trend comes on the heels of reports that discretionary spending faced challenges in the first quarter of 2024.
Mixed Performance:
While Tesco, the UK's largest food retailer, reported a robust first quarter, sportswear seller JD Sports Fashion observed a decline in UK sales for the same period. Similarly, sofa retailer DFS Furniture issued a profit warning amidst the shifting consumer landscape. EY UK and Ireland's retail lead Silvia Rindone noted that although economic indicators such as interest rates, inflation, and wages are improving, consumers appear to be adopting a cautious approach, awaiting a more optimistic economic environment before increasing their spending.
In summary, despite shopper caution, UK retail sales staged a remarkable recovery in May, hinting at potential optimism for the sector in the coming months.