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Re-opening of DIY stores drives 'bounce back' in retail sales

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
Britain's Prime Minister Boris Johnson visits a shop in Westfield Stratford shopping centre in east London, Sunday June 14, 2020, to see the preparations the stores are making to be COVID-19 secure. (John Nguyen/Pool via AP)

Retail sales partially bounced back in May thanks to the re-opening of hardware stores.

The Office for National Statistics (ONS) said on Friday that retail sales jumped 12% in May, far exceeding economists’ forecasts of a rise of around 6%.

The rebound was driven by a 42% surge in sales of household goods, which the ONS put down to the re-opening of hardware, paints and glass stores.

“While some garden centres and hardware stores were able to start trading again from mid-May, many others, such as clothing stores, moved to online,” the ONS said. “The growth in May, along with the weight to retail sales, meant that non-food stores provided the largest contribution to growth in May.”

Online sales rose to a record high of 33.4% of all sales in May, driven by a near 25% jump in non-store sales.

The data suggests the slump at the tills, driven by the COVID-19 pandemic, bottomed out in April. Month-to-month sales fell by 5.1% in March and then plummeted 18.1% in April, the first full month of lockdown.

While momentum is slowly recovering, sales remain far below where they were before the pandemic. The ONS said May’s sales were 13.1% lower than they were in February, before the pandemic struck. Over the three months to the end May, sales were down by a record 12.8%.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The overall consumer picture remains bleak.

“May’s recovery in retail sales should not be interpreted as a sign that the economy is embarking on a healthy V-shaped recovery from Covid-19,” he said in a note to clients, warning: “We expect households’ overall spending still will be about 5% below its pre-Covid peak at the end of this year, unless the Chancellor signs off a big fiscal stimulus package soon.”

A separate survey from market research firm GfK, also released on Friday, showed consumer confidence was gradually improving. Confidence rose 6 points from near record lows in June, although it still remained at -30.

GfK client strategy director Joe Staton said shoppers were “confused and some are not sure what to think.”

“Yes, we have seen queues as some shoppers return to battered high streets,” Staton said.

“But with economists warning that the post-lockdown upturn might not restore GDP to pre-Covid-19 levels, and with the labour market set for more job losses, we have to question whether we are seeing early signs of economic recovery or that infamous ‘dead cat bounce’.”