Retail sales jumped by 2.3 per cent in April, well ahead of expectations, reflecting good weather but also suggesting the UK consumer might be more resilient than feared.
City of London analysts had expected growth of 1 per cent, following March’s 1.8 per cent decline.
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.
Retail sales volumes were up 4 per cent on the same month a year earlier, accelerating from the 1.7 per cent growth rate registered the previous month.
On a three-month-on-three-month basis there was a 0.3 per cent increase in volumes, following a decline in March.
The ONS also revised its March retail sales estimate from a monthly decline of 1.8 per cent to a 1.4 per cent contraction.
The statistics agency said there was “anecdotal evidence” from retailers that good weather had helped sales in April.
Retail sales account for around 30 per cent of household consumption, which has powered growth in the wake of the Brexit vote last year.
Overall GDP growth slowed to 0.3 per cent in the first quarter of 2017, mainly thanks to a sharp slowdown of household spending.
In the first quarter retail sales had declined at their fastest quarterly rate in seven years.
This prompted many analysts to warn that the post-Brexit vote growth slowdown had begun, as households feel the pinch from higher prices stemming from the slump in the pound in the wake of last June’s referendum.
Inflation jumped to 2.7 per cent in April, the ONS reported this week, ahead of overall average wage growth, meaning real wages are falling for the first time since 2014.
“UK retail sales figures should help to allay concerns that real consumer spending growth is slowing sharply in the face of higher inflation,” said Ruth Gregory, UK economist at Capital Economics.
But other analysts warned that the retail sales figures, even with the agency’s seasonal adjustments, are volatile and should not be taken as a sign that the consumer is in good health.
“The data often are volatile around this time of year, suggesting that the ONS’s adjustment methodology fails to adjust fully for the boost to spending over the holidays,” said Samuel Tombs of Pantheon.
“April’s surge in retail sales likely isn’t a turning point, given the outlook for falling real wages, modest employment growth and a tightening of the supply of unsecured credit.”
The ONS said that the biggest contribution to April’s volumes increase was from non-food stores, with household goods volumes up 1.9 per cent.
Food store sales volumes were up 1.3 per cent and they rose at petrol stations by 4.9 per cent.