UK retail sales increased abruptly, but the big picture is unfortunate

May 23, 2022: -In April, British retail sales increased as shoppers loaded up on alcohol and tobacco, likely a blip in an unfortunate trend that has driven consumer confidence to all-time lows between worsening cost-of-living crunch.

The Office for National Statistics said that retail sales volumes increased 1.4% each month after a 1.2% decrease in March. Economists polled by Reuters are expecting a 0.2% monthly fall.

The broader picture remains disconcerting. Retail sales in the three months to April decreased 0.3%, after a 0.7% fall in March. In comparison with a year ago, sales volumes were 4.9% less, marking the most significant annual decrease since January 2021.

On Friday, the longest-running gauge of consumer confidence in Britain, the GfK survey, decreased to its lowest since records started in 1974.

British consumers were successful in the previous month by a double whammy of increasing household energy costs and higher taxes, and data published showed inflation reached a 40-year high of 9.0%.

According to the Bank of England, inflation will reach up to 10%.

“With price pressure set to persist through the rest of the year, households are likely to pare back discretionary spending, putting the brakes on economic growth,” said David Muir, senior economist at Moody’s Analytics.

“For the Bank of England, the challenge will be to walk the fine line between bringing inflation down while not tipping the economy into recession.”

The ONS said food store sales also surged by 2.9% in April, driven mainly by strong sales of alcohol, tobacco, and ‘sweet treats.

This was “possibly because of the people staying in more to save money,” ONS statistician Heather Bovill said.

She added that online clothes sales also did well as people got ready for summer holidays and weddings.

Leading supermarket groups such as Tesco and Sainsbury’s have warned of lower profits in 2022, and Premier Foods, the maker of Mr. Kipling cakes and OXO stock cubes, said it is planning to increase its product prices.