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UK Retail Sales Growth Tops Expectations

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UK retail sales recovered at a faster-than-expected pace in April despite higher inflation, giving hopes that consumer spending would boost growth in the second quarter.

Retail sales volume including auto fuel grew 2.3 percent month-on-month, reversing a 1.4 percent drop in March, figures from the Office for National Statistics showed Thursday.

This was the fastest growth since January 2016, and above the expected rate of 1.1 percent.

Likewise, retail sales excluding auto fuel climbed 2 percent in contrast to March's 1.2 percent decrease. Economists had forecast a moderate 1 percent expansion.

Food stores sales increased 1.3 percent and non-food store sales advanced 2.3 percent.

Ruth Gregory, an economist at Capital Economics, said today's figures support the assessment that with credit conditions remaining supportive, employment growth still-strong and consumers' confidence robust, household spending growth is likely to slow only gradually this year rather than collapse completely.

April retail sales data buoys hopes that consumer spending will not hamper UK GDP growth as it clearly did in the first quarter, IHS Markit economist Howard Archer said.

However, Archer said April's jump in retail sales looks unlikely to mark the beginning of a renewed upturn in consumer spending given the sharp and increasing squeeze on purchasing power.

In April, the annual increase in shop prices eased to 3.1 percent from 3.3 percent in March, the ONS said.

Consumer price inflation spiked to 2.7 percent in April. The Bank of England forecast inflation to rise further above the 2 percent target in the coming months, peaking a little below 3 percent in the fourth quarter.

On a yearly basis, overall sales volume growth doubled to 4 percent in April from 2 percent in March. Sales were forecast to rise 2.1 percent.

Excluding auto fuel, retail sales climbed 4.5 percent, following March's 2.8 percent increase. Economists had expected sales to climb 2.6 percent.

by RTT Staff Writer

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