Retail sales volume growth on track to reach strongest level since 2004

Retail sales have continued to forge ahead in May of this year. The figures from the Office for National Statistics showed that volumes rose by 1% (excluding automotive fuel) compared with the previous three months. The rise compared with March-May 2014 was 4.7%, but marked decrease in the general price level of goods in the sector meant that sales values rose by 2.6% (and only 1.4% for total retailing).

The current growth phase in sales volumes is not only strong but remarkably prolonged. The underlying pattern in the three-month on three-month movement showed growth for the 27th consecutive month. This is the longest period of sustained growth since consistent records began in June 1996.

This growth is supported by the continued recovery of the predominantly food stores retail sector with a gain of 0.6% between April and May and whilst the clothing and footwear stores had a quiet month in May they saw a robust gain of almost 6% in the past year. Household goods stores continue to benefit from rising incomes and the housing market revival with growth of 11.3% in the year to March-May.

>>Consult our infographic for full details on retail sector trends

Experian’s economists expect the recent momentum in retail sales volumes to be sustained for the rest of this year and through 2016. Indeed several economic indicators are supporting the current growth; the marked increase in wage growth to 2.7% coupled with still strong employment growth and very low inflation will continue to boost disposable incomes and consumer confidence.

Retail sales volume growth this year is on track to reach 4.5 to 5%, the strongest since 2004. Growth will remain healthy in 2016, though not matching this exceptional pace. While value growth is expected to remain under pressure, especially in the predominantly food store sector, we believe deflation is past its peak and will continue to ease gradually.