UK Retail Sales: May 2013 Release

Figures released today by the Office for National Statistics (ONS) show that retail sale volumes fell by 1.3% (seasonally adjusted) between March and April. However, the three-month comparison, which provides a better perspective of recent trends by reducing the impact of monthly volatility, showed an increase of 0.7% in February-April compared with the previous three months.

Analysis of the data for the latest quarter compared with the previous three months shows a mixed picture. Only gains by other stores (+3.6%) and non-store retailing (+7.9%) enabled retailing as a whole to post growth.

Predominantly food stores suffered a 0.3% decline in volumes continuing the trend of recent years, with the quantity bought 1.3% lower than in the corresponding quarter of 2012. A steady rise in food prices continues to squeeze disposable incomes, possibly resulting in consumers buying less or substituting cheaper foods.

Textile, clothing & footwear stores saw volumes fall by 0.6% q-on-q leaving sales flat over the year, and department stores suffered a decline of 0.2%, though sales over the year still show a healthy 3.7% advance. Household goods stores (-1.8% q-on-q and -4.3% comparing February-April this year with the same period in 2012) suffered the most severe volume declines.

While the overall gain of 0.7% q-on-q in the latest quarter suggests a degree of resilience in retail sales volumes, the difficult backdrop for household finances and low consumer confidence is clearly affecting some sectors.

We expect these unfavourable conditions to continue to weigh on sales volumes in the next few months. Inflation fell to 2.4% in April but remains well above earnings growth, just 0.4% in the first quarter of this year, the smallest rise since early 2009. The cap on benefits will also weigh on spending. However, if recent signs of improvement in the economy are sustained, sales volumes should regain momentum towards the end of this year.