News Worms
News Worms

United Kingdom retail sales surge ahead of forecasts despite pay squeeze

United Kingdom retail sales surge ahead of forecasts despite pay squeeze

Retail sales jumped by 2.3 per cent in April, well ahead of expectations, reflecting good weather but also suggesting the United Kingdom consumer might be more resilient than feared.

"UK retail sales rose by 4.0% year on year in April, by 2.3% month on month, and in the three months to April they rose by 0.3% compared to the previous 3-month period".

Observations suggest that the 1.5-percent decline in sales over the first quarter is effectively offset by April's massive gains, meaning that even if retail halts at zero over the next two months (which is unlikely), there will still be quarter-on-quarter growth now.

The UK gilts rallied Thursday as investors largely shrugged off the wider-than-expected rise in the country's retail sales for the month of April.

The pound jumped 0.5 per cent in the wake of the release from the Office for National Statistics, pushing through the $1.3 mark to $1.3036, as traders adjusted their bets on an earlier interest rate rise from the Bank of England.

The figures also showed an increase in average weekly earnings, with a rise of 2.1 per cent, whilst several sectors also saw an increase in the number of jobs.

A recovery in sterling's value - while still way below its pre-referendum level above $1.50 - could help limit the threat to households from inflation in the months ahead.

Economists expect it to climb above 3%.

"The theory went that squeezed household budgets would likely hit retailers in the pocket too". This was more than double the 1.0% forecast and reversed the 1.4% decline in March when sales recorded their biggest fall in seven years.

Accelerating inflation and meager wage growth weighed down heavily on consumer spending in the first three months of the year, causing the whole economy to slow significantly, preliminary figures showed.

There was a positive impact on sales from the late Easter this year and the ONS also cited favourable weather conditions as providing a boost to sales.

"April's surge in retail sales was more than enough to compensate for the first quarter's weakness, lifting the level of sales to the highest since last November".

Analysts had expected April's reading to increase by just 1.0%.


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