Shock 2.3% fall in retail sales pours more cold water on PM
THE UK’s economic recovery hit a major speedbump just two days after Rishi Sunak’s election announcement, as official figures today revealed retail sales fell by a shock 2.3% in April.
The numbers confounded City economists, who had expected a much more modest 0.4% decline.
Bad weather and the timing of the Easter holiday both played a role in the fall. Clothing retailers, sports equipment, games and toys stores, and furniture stores in particular struggled, while sales at the pump suffered their biggest monthly fall since October 2021.
Sales are now down 0.8% year-on-year, while sales at household goods stores dropped by 5.4%. The amount spent online, known as online spending values, fell by 1.2% last month, and by 1.5% over the year. Revised figures show retail sales fell in March as well.
The data has poured cold water over claims from the PM and Chancellor Jeremy Hunt that the economy is on the right track heading into the election. GDP had grown in the first quarter by 0.6% after the end-of-2023 recession, offering hope that the sluggish economy was finally getting out of first gear. However, a sharp retail slowdown could put it back into stagnation or decline.
Economists will hope the unusually large fall will be followed by a swift recovery in the statistics, as was the case in December and January, when a huge fall followed by a significant recovery raised questions over how the numbers had been seasonally adjusted.
Hopes of a retail rebound were bolstered after data also out today showed consumer confidence is continuing to gradually strengthen, particularly on prospects for personal finances and the economy over the next 12 months.
Peter Arnold, EY UK Chief Economist, said that it was “clear that the retail sector is still struggling to generate much momentum. Though inflation is proving stickier than previously hoped, it has fallen significantly over the past year and most consumers are enjoying strong real wage gains.
“That said, the strength of real income growth is being dampened by tighter fiscal policy and, for borrowers refinancing fixed-rate mortgages this year, by the lagged impact of tighter monetary policy.”