UK recovery hopes bolstered by strong retail numbers
Better-than-expected retail sales during May have buoyed hopes that the UK economy will return to growth in the second quarter.
The latest Distributive Trades Survey, published by the Confederation of British Industry (CBI), shows 43% of retailers saw an increase in sales volume compared with a year ago, while 23% reported a fall.
The resultant balance of 21% was above expectations of 19% in favour of a retail sales rise.
Sales increases were strongest in the furniture & carpets, non-specialised including department stores and grocery sub-sector, the survey shows.
Judith McKenna, chair of the CBI’s distributive trades panel, says: “It’s encouraging to see high-street sales up compared to a year ago.”
“Sales are still below the average for the time of year”
“However, sales are still below the average for the time of year and the combination of high unemployment, slow wage growth and weak consumer confidence means that the retail sector is likely to remain under pressure in the short term.”
Howard Archer, chief UK and European economist at IHS Global Insight, says the “substantially” better-than-expected findings should ease concerns that followed disappointing official retail numbers for April. (article continues below)
“Given the key role of consumer spending, the CBI survey lifts hopes that the economy can return to growth in the second quarter,” Archer says, “although it does face the significant handicap of the hit to activity that will come from the extra day’s public holiday due to the Queen’s Diamond Jubilee.”
Martin Beck, UK economist at Capital Economics, suggests the Diamond Jubilee and the Olympic Games in August could offer “some temporary support to certain types of spending”, although the consumer recovery is likely to drag over the rest of the year.
“The underlying picture looks weak, especially now that consumers are feeling the effects of the eurozone crisis via rising borrowing rates and falling financial wealth,” he concludes.
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