Retail sales in the United Kingdom unexpectedly fell in April, led by the biggest drop in food sales for almost two years and indicating continued weakness in consumer spending. Sales, including that of fuel, declined by 1.3 per cent from March, when they fell by 0.6 percent, according to the London-based Office for National Statistics.
The median forecast of 25 economists in a Bloomberg News survey was for a 0.1 per cent increase. Food sales plunged by 4.1 per cent, the most since May 2011. Inflation in the United Kingdom slowed in April, which may ease the squeeze on households.
The Bank of England has forecast a gradual recovery in consumer spending. However, weak wage growth may limit any pickup in expenditure. The Marks and Spencer Group said that the consumer backdrop remains “challenging.”
“We have seen retail sales pick up at the start of the year, and that helped the overall economy to grow,” Samuel Tombs, an economist at the London-based Capital Economics Ltd, said. He added, “But here’s a lingering squeeze on household pay from inflation. So this pick-up is unlikely to be sustained.”
The drop in food sales may have been partly due to the rising prices, the statistics office said. It added that poor weather hindered sales of summer ranges, including barbecue equipment and garden furniture. From a year earlier, total retail sales rose by 0.5 per cent.
Recovery Risks
Excluding fuel, retail sales fell by 1.4 per cent in April from March and were up by 0.2 per cent from a year earlier. Mervyn King, governor, Bank of England, said that a recovery is now “in sight” in the United Kingdom.
The central bank sees the economy expanding by 0.5 per cent this quarter after a growth of 0.3 per cent in the previous three months. Still, there are risks to the recovery, including the tensions in the euro area.
While inflation slowed to 2.4 per cent in the United Kingdom last month, it continues to outpace wage growth. GfK said, “Consumer confidence declined in April as households became more concerned about their personal finances.”
Separate data showed the Britain’s underlying budget deficit widened in April. The shortfall, excluding temporary support for banks, was 10.2 billion pounds ($15.4 billion), compared with 8.9 billion pounds a year earlier. The figure excludes the transfer of coupon income from the Bank of England's gilt holdings to the Treasury.
