UK retail sales smash forecasts as Britons celebrate royal wedding and bask in sun
LONDON (Reuters) - British retail sales jumped for a second month in a row in May, far outstripping expectations as a royal wedding and warm weather helped shoppers put a winter slump further behind them, data showed on Thursday.
The figures suggested that the economy was recovering from a sharp slowdown in early 2018 that put the Bank of England off an interest rate hike.
Retail sales volumes jumped by 1.3 percent in monthly terms following an upwardly revised 1.8 percent bounce-back in April, the Office for National Statistics said.
The increase was above all forecasts by economists in a Reuters poll which had seen sales up by only 0.5 percent.
Supermarkets and other retailers said shoppers spent more on food and household goods in the run-up to the wedding of Prince Harry and Meghan Markle in the middle of the month, the ONS said.
In the three months to May, sales rose by 0.9 percent compared with a 0.2 increase in the three months to April, a period which included heavy snowstorms and unusually cold temperatures.
Compared with a year earlier, sales volumes were up 3.9 percent, the biggest rise in more than a year and again above all forecasts in the Reuters poll. The rise was stronger than 1.4 percent growth in the 12 months to April.
Last week, figures from British Retail Consortium and Barclaycard suggested that sales in May rose sharply.
The BoE expects consumers to feel the benefit of a fall in inflation and rising wages after suffering a squeeze on their spending power last year when the impact of the 2016 Brexit vote pushed up prices sharply.
However, it held off from raising rates at its May meeting as it waited to be sure that Britain’s economy was recovering from its early 2018 slowdown.
Data published earlier this week suggested that the recovery has been slow - factories had their worst month in five-and-a-half years in April and the pace of growth in wages slowed.
The still weak finances of many households, combined with the rise of online shopping, has hammered many retailers.
Chains such as Marks & Spencer (MKS.L) and House of Fraser have been forced to shut stores as consumers shop online for cheaper goods and other retailers have gone out of business.
The gauge of inflation used in the retail sales data, the retail price deflator, rose by an annual 2.4 percent in May, up from 2.2 percent in April.
The ONS said that retail sales in cash terms were up by 6.3 percent, the biggest increase since April 2017.