British retail sales grow as consumers spend on summer goods

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British retail sales unexpectedly grew last month despite high inflation, boosted by spending on summer clothing and outdoor goods.

The quantity of goods bought rose 0.3 per cent between April and May, following a 0.5 per cent rise in the previous month, according to data published on Friday by the Office for National Statistics. That was stronger than the 0.2 per cent contraction forecast by economists polled by Reuters.

ONS senior statistician Heather Bovill said online shops did “particularly well selling outdoor goods and summer clothes, as the sun began to shine”.

She added that sales in garden centres and DIY stores also grew, as the “good weather encouraged people to start home and garden improvements”.

May also saw a return to growth for fuel sales after a dip in April.

The extra bank holiday for the coronation of King Charles III on May 8, which has not been removed from the ONS seasonal adjustment, also played a part in May’s sales growth, according to some economists.

Phil Monkhouse, head of sales at global financial services company Ebury, said: “Three bank holidays, the Coronation and warmer weather drove shoppers to the tills and online checkouts in May, defying the enveloping economic gloom around the nation.”

Sales also expanded in the three months to May compared with the previous three months, a less volatile measure of spending, showing improvements after contracting throughout last year.

“The further rebound in retail sales volumes in May suggests the recent resilience in economic activity hasn’t yet faded,” said Ruth Gregory, economist at Capital Economics.

Separate data released on Friday showed UK consumer confidence rose for the fifth consecutive month in June to the highest level since January 2022.

The Bank of England noted the strengthening of most indicators of household spending and “continued resilience in demand” as it raised interest rates to 5 per cent on Thursday.

However, the impact of high inflation was still visible in the data. In May, shoppers spent 17 per cent more than in February 2020, before the pandemic, but they bought 0.8 per cent fewer goods as the fast rise in consumer prices reduced the amount people could afford.

Food sales were also down in May, with retailers indicating that increased cost of living and food prices continued to affect sales volumes, the ONS reported. Food sales, down 0.5 per cent, were also affected by many people ordering takeaways and drinking out more during the extra bank holidays.

Samuel Tombs, economist at Pantheon Macroeconomics, said high inflation would continue to weigh on sales in June despite household incomes being boosted by a pick-up in wages and an increase in benefits from April. He also forecast the fall in the energy price cap from July would offset the recent surge in mortgage payments.

As a result, “a consumer-led downturn will be avoided, but expect growth in real expenditure to be modest”, said Tombs.