UK Markets closed

Discounting Helps Retail Sales Bounce Back

(c) Sky News 2012

Falling inflation combined with heavy discounting helped retail sales bounce back in the run-up to the Diamond Jubilee celebrations in May.

The Office for National Statistics said volumes rose 1.4% in the month following a revised fall of 2.4% in April.

The increase was driven by clothing and footwear purchases and in particular by a 6.2% surge in fuel sales as prices started to dip.

When the impact of fuel was stripped out, total retail sales volumes increased by 0.9%.

The headline rate of inflation has fallen back throughout 2012, from a 5.2% peak last September to 2.8% in May, as weak economic growth weighed on companies and consumers alike.

Heavy rain was blamed for the 2.4% plunge in total sales during April.

The ONS said a bright spell of sunshine later in May had a small impact on the clothing sector.

It estimated that the price of goods in department stores on average had fallen 2% in the last 12 months.

Discounting and promotions ahead of the Diamond Jubilee were also seen elsewhere in the sector.

Disappointing food sales growth of just 0.2% did not take into account the effect of the celebrations as the survey period ended on May 26.

The ONS said the retail sector's performance during the extended holiday weekend would be included in June's figures and likely boost future growth.

Following the official release, the pound gained strength against both the dollar and the euro but there was little impact on retailers within the FTSE 100 (Euronext: VFTSE.NX - news) .