Retail sales rise unexpectedly, as inflation hammers UK consumer confidence – business live

Show key events only Live feed Show key events only 9m ago 03.13 The bounce in retail sales may mean a severe recession is not inevitable, says James Smith, developed markets economist at ING, if people dip into their savings. But with consumer confidence at record lows , the UK economy could shrink this quarter: .css-knbk2a{height:1em;width:1.5em;margin-right:3px;vertical-align:baseline;fill:#C70000;} Today’s consumer confidence figures fell below all-time lows, and that’s especially noticeable when looking at consumers’ outlook for personal finances. Assuming consumers remain more enthusiastic about services spending rather than goods in the near-term, we suspect this cost of living squeeze will be more acutely felt on the high street and among online retailers over the coming months. So despite the latest bounce in retail sales, we still narrowly suspect the economy will experience negative growth this quarter – though if it happens it will be more down to falling health output and the effect of the extra bank holiday, than the deteriorating consumer story. A more severe downturn may still be avoided if consumers dip into their pool of savings accumulated through the pandemic, which amount to around 8% of GDP in excess of what we’d have expected had Covid not happened – the major caveat of course being that these are more heavily concentrated among higher-income workers. UK GFK Consumer Confidence announcement – Actual: -40, Expected: -39 pic.twitter.com/SrFJEzqTav — Spreadex Trading (@spreadexfins) May 19, 2022 17m ago 03.05 Nicholas Farr , assistant economist at Capital Economics , says the economy may have held up better than thought: .css-knbk2a{height:1em;width:1.5em;margin-right:3px;vertical-align:baseline;fill:#C70000;} The unexpectedly strong 1.4% m/m rise in retail sales in April suggests that the cost of living crisis hasn’t caused consumer spending to collapse and means that the economy may have a little more momentum than we thought. It also supports our view that a weaker economy won’t solve the issue of sky-high inflation for the Bank of England without interest rates having to rise much further. 24m ago 02.58 The retail sales report also shows the stark impact of inflation, particularly the jump in petrol and diesel. Shoppers actually spent 4.5% more in April than a year ago, but ended up with 4.9% less stuff. On a monthly basis, retail sales values (the amount spend) jumped by 1.9%, but volumes (the quantity shoppers bought) were 1.4% higher. And over the last quarter, people spent 10% more than a year ago, to get 1% more items. That widening gap between retail sales values and volumes reflects rising prices in the shops, with inflation now at a 40-year high of 9%. If you strip out fuel sales, the gap narrows – but it’s still there: UK retail sales to April 2020 Photograph: ONS [I think the last line should read ‘ volume (excluding automotive fuel)‘] 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 43m ago 02.39 UK retail sales Photograph: ONS 45m ago 02.37 Retail sales: snap reaction Here’s some early reaction to April’s rise in retail sales . Keith Church , head of economic modelling at risk consultancy 4most, points out that the wider picture remains subdued: After falling 1.2% in March, retail sales volumes rebounded by 1.4% in April. But the wider picture is hardly encouraging. pic.twitter.com/OulujZHy9q — Keith Church (@keithbchurch) May 20, 2022 S uren Thiru , head of economics at the British Chambers of Commerce , also highlights this point: @ons figures show retail sales up 1.4% m/m in April, from a 1.2% drop in March Monthly rise largely driven by a 2.8% rise in food store sales Sales fell by 0.3% in Apr on the 3m/3m measure (a better gauge of the underlying trend), continuing the downward trend since summer 2021 pic.twitter.com/HclqqGePOh — Suren Thiru (@Suren_Thiru) May 20, 2022 Kate Nicholls , CEO at UKHospitality , agrees that the data suggests people have been staying at home more: Retail sales volumes increased by 1.4% in April, with the biggest driver coming from food store sales which rose by 2.8%, alcohol and fuel – suggesting people staying at home more https://t.co/6o7UoonR2m — Kate Nicholls (@UKHospKate) May 20, 2022 54m ago 02.28 Retail sales rise, lifted by supermarket spending Retail sales have risen unexpectedly, in a sign that squeezed consumers have been staying at home more due to the cost of living squeeze. Retail sales volumes across Great Britain rose by 1.4% in April, following a fall of 1.2% in March, the Office for National Statistics reports — better than the 0.2% fall economists had expected. The recovery was driven by a rise in food store sales volumes — up 2.8%, due to higher s pending on alcohol and tobacco in supermarkets (supermarket food sales were broadly unchanged). Sales volumes at alcohol and tobacco stores jumped 8.4% over the month – another sign that more people have been heading to the off-licence instead of the pub. There was also a jump in clothes sales, which may show people are preparing for summer holidays and events such as weddings. That lifted online shopping. Fuel sales rose 1.4% after a 4.2% tumble in March when record increases in petrol prices impacted sales (prices have hit new highs this month, though). But the broader picture is still weak: over the last three months, sales volumes have dropped by 0.3% when compared with the previous quarter. That continues the downward trend since summer 2021, as rising inflation has hit disposable incomes. April’s retail sales volumes were 4.9% lower than a year ago, when spending was boosted by the relaxation of lockdown rules. ONS deputy director for surveys and economic indicators Heather Bovill explains: .css-knbk2a{height:1em;width:1.5em;margin-right:3px;vertical-align:baseline;fill:#C70000;} “Retail sales picked up in April after last month’s fall. However, these figures still show a continued longer-term downward trend. “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 Commenting on today’s retail sales figures for April, Heather Bovill said: (1 / 4) ⬇️ pic.twitter.com/9YPB1jaaiP — Office for National Statistics (ONS) (@ONS) May 20, 2022 Heather Bovill added: (2/4) ⬇️ pic.twitter.com/1Ipi9uUTUO — Office for National Statistics (ONS) (@ONS) May 20, 2022 Heather Bovill continued (3 / 4) ⬇️ pic.twitter.com/nRIk3obpdd — Office for National Statistics (ONS) (@ONS) May 20, 2022 Heather Bovill concluded (4 / 4) ⬇️ pic.twitter.com/bAyxhdBzdT — Office for National Statistics (ONS) (@ONS) May 20, 2022 Updated at 02.55 EDT 1h ago 02.26 Introduction: UK consumer confidence at record lows Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets. The cost of living squeeze has pushed consumer confidence to its lowest on record, adding to concerns the UK could be falling towards recession. Research company GfK’s UK consumer confidence index fell 2 percentage points to minus 40 in May, its lowest level since records began in 1974, beating the previous record set in the financial crisis. #UK UK GfK Consumer Confidence May: -40 (exp -39; prev -38) – Lowest Since Records Began In 1974 pic.twitter.com/5crsf8VRgk — Datoeconomia (@datoeconomia) May 20, 2022 The survey found that people’s personal financial stituation had deteriorated over the last 12 months, making them less likely to make major purchases. The general economic view had worsened too, as inflation climbed to its highest in decades. Joe Staton , client strategy director at GfK says: .css-knbk2a{height:1em;width:1.5em;margin-right:3px;vertical-align:baseline;fill:#C70000;} “This means consumer confidence is now weaker than in the darkest days of the global banking crisis, the impact of Brexit on the economy, or the Covid shutdown. Consumer pessimism is most evident in depressed sub-measures on the general economy at -63 for the past year and -56 for the coming year. The Major Purchase Index has decreased for each of the past six months and is now at -35, reflecting the latest dismal set of retail sales figures. Even the Bank of England is pessimistic, with Governor Andrew Bailey this week offering no hope of tackling inflation. The outlook for consumer confidence is gloomy, and nothing on the economic horizon shows a reason for optimism any time soon.” UK consumer confidence falls to lowest level since 1974 Read more Bank of England chief economist Huw Pill speech could give his view on the economic outlook, when he pays a visit to Wales today. Elsewhere, European stock markets are expected to open higher, recovering some of Thursday’s tumble: European Opening Calls: #FTSE 7381 +1.08% #DAX 14002 +0.86% #CAC 6321 +0.77% #AEX 684 +0.77% #MIB 24271 +0.86% #IBEX 8459 +0.63% #OMX 2009 +0.83% #SMI 11409 +0.88% #STOXX 3670 +0.80% #IGOpeningCall — IGSquawk (@IGSquawk) May 20, 2022 Shares in ecommerce group THG could surge, after British property tycoon Nick Candy revealed last night that he is considering a takeover offer for the company. Property tycoon Nick Candy considering bid to take over THG Read more The agenda 7am BST: UK retail sales for April 7am BST: Sunday Times rich list published 8.30am BST: Bank of England chief economist Huw Pill speech during an agency visit to Wales 12.30pm BST: Canadian private sector payrolls 3pm BST: Eurozone consumer confidence (flash estimate) for May Topics Business Business live Economics Stock markets Retail industry Reuse this content