UK Retailers Experience Strong Sales Rebound in April Amid Cost-of-Living Challenges
In April, UK retailers witnessed a sales surge surpassing initial expectations, rebounding from a previous month of reduced footfall due to significant rainfall, which confined people to their homes.
According to the Office for National Statistics, the quantity of products sold through both physical stores and online platforms experienced a 0.5% increase in April, following a larger-than-previously-estimated decline of 1.2% in March. Economists had initially predicted a 0.3% rise, making the actual rebound even more noteworthy.
This recovery highlights the unexpected resilience of consumers amid a challenging cost-of-living situation, with sales demonstrating growth in three out of the last four months. As a result, the Bank of England faces additional pressure to raise interest rates in its efforts to tackle persistently high inflation.
“A resurgence in sales indicates a restoration of consumer trust, as expenditure remains resilient despite recent interest rate hikes and persistent inflation,” commented Aled Patchett, who serves as the Head of Retail and Consumer Goods at Lloyds Bank.
The Office for National Statistics observed an increase in sales across all categories, except for fuel and household goods. When excluding fuel, the volume of sales surged by 0.8%. Furthermore, sales from February to April witnessed a 0.8% growth, marking the most substantial three-month improvement since August 2021.
Oliver Vernon-Harcourt, the Head of Retail at Deloitte, remarked that despite the persistent pressures of inflation, the retail sector experienced an unexpected surge in sales during April.
“The current economic landscape remains highly challenging for many individuals, but there are gradual signs of improvement in consumer confidence compared to the record lows witnessed in the previous year.”
Following the release of the data, the value of the British pound strengthened against both the U.S. dollar and the euro.
Emma Mogford, a fund manager at Premier Miton Monthly Income Fund, noted that rising wages were mitigating some of the pressures of the cost of living. However, she cautioned that any rise in unemployment later in the year could once again dampen confidence.
According to earlier data published this week, inflation moderated to 8.7% in April from 10.1% in March. Nonetheless, the decrease was smaller than anticipated, and measures of underlying inflation showed an increase.
Bank of England Governor Andrew Bailey stated on Wednesday that inflation could remain persistent and challenging.
The latest figures released on Friday serve as a reminder of how the ongoing cost-of-living crisis is impacting household expenditure.
Compared to the same period a year ago, retail sales volumes in April witnessed a decline of 3.0%. Food sales experienced a 2.7% annual decrease, although it marked the second smallest drop since the end of 2021.
Martin Beck, the chief economic adviser at EY ITEM Club, highlighted that the likelihood of further rate hikes by the Bank of England would have a financial impact on many individuals with fixed-rate mortgage deals who have not yet felt the effects of rising borrowing costs. He pointed out that around 2.5 million households could face higher mortgage interest payments in 2023.
Grant Fitzner, the Chief Economist at the Office for National Statistics (ONS), mentioned that jewellers, sports retailers, and department stores had a successful month in April.
JD Sports Fashion (JD.L) expects to achieve a record underlying profit exceeding £1 billion ($1.26 billion) this year, as there was increased demand from young shoppers for trainers, joggers, and hoodies. Marks & Spencer (MKS.L), one of the well-known retailers in Britain, forecasted modest revenue growth this week.
Fitzner noted that despite persistently high food prices, supermarkets managed to recover from the decline experienced in March. However, this recovery was partially offset by a decrease in fuel sales volume, despite falling fuel prices.
On a monthly basis, food sales rebounded with a 0.7% increase after a 0.8% decline in March.
Retailers reported that the 2.2% decline in fuel sales volumes in April was partly attributed to a wave of strikes by public sector workers, according to an ONS official.