2 days ago
Retail sales slumped in May after April spending spree - but consumers are feeling more confident
Retail sales slumped last month as shoppers held back after an unexpected April binge, and higher inflation weighed on spending.
Retail sales volumes fell 2.7 per cent in May, far exceeding expectations of a 0.5 per cent fall and dragged lower by a 5 per cent slump in food sales, according to fresh data from the Office for National Statistics.
All sales categories suffered decline for the month and volumes are now 1.3 per cent lower than this time last year, the biggest drop since April 2024 and well below economists' forecasts for 1.7 per cent growth.
It follows the sunniest April on record, which prompted Britons to splurge on new clothes, food for Easter gatherings and DIY essentials, and drove retail sales 7 per cent higher for the month.
Sagar Shah, associate partner at McKinsey & Company, said retailers' reversal of fortunes could be linked to food inflation hitting its highest level since February 2024 at 4.4 per cent, while 'other fiscal pressures' faced by retailers, such as higher labour costs, 'could potentially be impacting promotions'.
But separate data on Friday showed British consumer confidence rose is now at its strongest level this year, with Britons feeling more slightly more positive on the economic outlook.
Shah added: 'What's becoming increasingly clear is that consumer sentiment and spending patterns are no longer neatly aligned.'
GfK's closely watched consumer confidence index rose to -18 in June from -20 in May, beating forecasts of an unchanged reading.
Consumers' assessment of their personal financial situation over the next 12 months remained unchanged at 2 for the month, just barely in positive territory, while their assessment of the UK's economic outlook over the same period improved from -33 to -28.
Neil Bellamy, consumer insights director at GfK, cautioned that sentiment could easily deteriorate from here.
He said: 'With petrol prices set to rise in the coming weeks following the escalation of the conflict in the Middle East, and with ongoing uncertainty as to the full impact of tariffs, there is still much that could negatively impact consumers.'
Thomas Pugh, chief economist at RSM UK, warned tax rises, higher utility bills and more expensive petrol 'will eat into consumers' disposable income', while a cooling labour market will weigh on wage growth and employment throughout the rest of this year.
He added: 'However, the outlook is far from dismal. Despite rising inflation and slower wage growth, real incomes will still rise at a reasonable pace this year.
'Household balance sheets are considerably stronger than they have been previously, and lower interest rates will continue to help. What's more, there are good signs that the worst of the labour market pain and tariff uncertainty is already behind us.
'The determinant of spending growth in the second half of the year is likely to be whether consumer confidence continues to rebound and households ease back on their extraordinarily high saving rates.
