Clothing and food sales drive April retail sales bounce back

Commenting on the April ONS retail sales data, which showed an increase in retail sales volumes of 1.4%, Jacqui Baker, partner and head of retail at RSM UK, said:

‘Despite the cost of living crisis and lockdowns in China causing further supply chain disruption, resilient retailers saw a bounce back of 1.4% in retail sales last month. Easter holidays combined with improved weather boosted food sales by 2.8%, whilst holidays, more weddings and festivals led to an increase in demand for clothing, with sales up 1.3% in April.

‘Given such as sharp fall in March some restocking of pantries and fuel tanks could have been expected, but the outlook for rest of the year looks difficult for consumers with increased energy bills and the cost of living squeeze hitting household budgets.

‘New Covid lockdowns in China also hampered further sales as stores are struggling to get stock. In such a challenging trading landscape, not being able to capitalise on pent up demand due to supply issues is unwelcome and adds another layer of complexity as it forces retailers to source their stock from elsewhere.

‘As the Government closes the online sales tax consultation (today), which has divided opinion across the sector, retailers will be hoping that any future policy supports growth rather than adding further complexity and potential cost at a time when retailers look to recover post-pandemic.’

Thomas Pugh, economist at RSM UK, added: ‘The 1.4% m/m rise in retail sales volumes suggests that consumers are not as pessimistic as the huge slump in consumer confidence to a 50 year low would imply. Indeed, April’s rise reverses almost all of the falls in retail sales in February and March. While this could just be a one-off bounce back after a sharp contraction in March, it does give us confidence in our view that consumer spending will help the UK to narrowly avoid a recession.

‘However, there is worse to come over the rest of the year as the cost-of-living crisis is likely to worsen in Q4, with further rises in energy bills and food bills. The outlook for retail sales, which account for about a third of consumer spending, and the broader economy will depend on the willingness of households to use their savings to cushion the blow. There is some early evidence that consumers are starting to save less and borrow more to insulate themselves from soaring inflation. That is a key reason why we aren’t expecting a recession in the second half of this year, although with GDP growth set to be flat over the rest of the year, it wouldn’t take much to push the UK into a recession.’

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