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Rebound In U.K. Retail Sales Signals Quick Economic Recovery


U.K. retail sales rebounded at a faster-than-expected pace in May driven by food store sales, adding to evidence of economic recovery gaining firm footing in the second quarter.

Sales volume including automotive fuel grew 2.1 percent in May from a month ago, when it was down 1.1 percent, figures released by the Office for National Statistics showed Thursday.

It was the fastest growth since February and stronger than the expected 0.8 percent increase.

After sales were held back by cold weather in April, the increase in volume excluding automotive fuel also came in at 2.1 percent in May, reversing last month's 1.2 percent drop. Economists had forecast a moderate 1 percent rise.

An increase of 3.5 percent in food store sales helped the overall turnover to log a faster-than-expected increase. Non-store retailing gained 4.3 percent from a month ago. By contrast, the increase in non-food store sales eased to 0.7 percent from 2.3 percent.

The underlying retail picture appears to be strengthening, Martin Beck, U.K. economist at Capital Economics, said. Along with other sectors of the economy, retail sales may provide a modest boost to growth in the second quarter.

However, IHS Global Insight's Chief U.K. economist Howard Archer said there are still significant uncertainties about the prospects for consumer spending going forward.

While record high employment and improving confidence are encouraging for consumer spending prospects, purchasing power is currently being constrained by very low earnings growth and recently higher inflation, Archer noted.

At his final Mansion House speech this week, Bank of England Governor Mervyn King said there is a need to support the recovery, although there are "clear signs" that a modest recovery of the U.K. economy is underway.

Annual growth in retail sales volume including auto fuel more than doubled to 1.9 percent from 0.8 percent in April. Economists had forecast sales to grow only 0.2 percent.

Excluding auto fuel, sales advanced 2.1 percent annually after rising 0.6 percent in April. The rate of increase far exceeded the 0.5 percent expected rise.

Average weekly spending online in May was GBP 582 million. This was an increase of 10.3 percent compared with May 2012.

by RTTNews Staff Writer

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