UK retailers experienced a robust recovery in sales during the month of April, surpassing expectations and bouncing back from a slump caused by heavy rainfall in the previous month. According to the Office for National Statistics (ONS), both in-store and online sales volumes increased by 0.5% compared to March, which saw a downward revision of a 1.2% decline. Economists had initially predicted a more conservative growth rate of 0.3%.
This impressive rebound in sales signifies a surprising resilience among consumers, particularly considering the ongoing cost-of-living squeeze. It also adds further pressure on the Bank of England (BOE) to consider raising interest rates as part of its efforts to rein in persistently high inflation rates.
The ONS report revealed that sales volumes increased for almost every category, with the exception of fuel and household goods. In fact, the three-month period leading up to April experienced the strongest sales growth, rising by 0.8% since August 2021.
However, the data also sheds light on the impact of inflation on consumer behavior. While consumers spent 16.5% more in April compared to February 2020, the increase in prices has resulted in a 0.8% reduction in the actual volume of goods purchased. This trend underscores the economic reality of paying more for less, as prices have risen at an unprecedented rate. With inflation still exceeding the BOE’s target by more than four times, the resilience of the economy is being tested.
Grant Fitzner, Chief Economist at the ONS, noted the positive growth across various sectors such as jewelers, sports retailers, department stores, and supermarkets, which managed to recover from the previous month’s slump despite ongoing high food prices.
The release of this data led to a slight appreciation of the pound against the dollar, rising 0.2% in early London trading. Investors, on the other hand, reacted by increasing their bets on further rate hikes. A recent inflation reading showed that price pressures are persisting longer than anticipated, leading to expectations of a peak inflation rate of at least 5.5% by September, up from the current rate of 4.5%.
It is worth noting that April also saw welfare benefits for approximately 19.2 million families surge by 10.1% as the government aimed to shield the most vulnerable from escalating food and energy costs. These measures likely contributed to the overall growth in retail sales.