Yahoo Finance Retail sales boost is likely to be a blip, warn experts
Experts have warned that a boost in shoppers’ spending last month is unlikely to mean a prolonged turnaround for high-street stores experiencing a rough ride in recent weeks
Warm weather and the royal wedding encouraged shoppers in May, defying predictions from economists that the month would be sluggish for retail sales.
Official data from the Office for National Statistics showed that sales rose 1.3% last month, higher than the 0.5% forecast by economists polled by Reuters.
The figures published on Thursday came after a spate of bad news from retailers. Last week department store House of Fraser announced it would shut 31 of its 59 stores, hitting 6,000 jobs, while earlier this week discount retailer Poundworld entered administration after rescue talks stalled.
So what is really happening to consumers’ habits? Explaining a 1.3% rise in the quantity of sales between April and May, the ONS said: “Feedback from retailers suggests that a change in the weather seen earlier in the year has seen increases in consumer spending in the current month”.
“The Met Office also reported above average temperature, stating that May was ‘provisionally the equal second-warmest May in a series from 1910’,” the ONS added.
In contrast, the weather was colder than on average in February and March, the ONS said, saying the shift to warmer weather may have encouraged spenders to spend later in the year.
Samuel Tombs, Chief UK Economist at Pantheon Macroeconomics, does not regard the figures as a sign consumers are ready to start spending again. “The jump in retail sales in May has all the hallmarks of a weather-related blip,” Tombs said.
He said the retail sales figures were boosted by sharp increases in sales of clothing, sporting goods and garden items. “Average temperatures were 1.8 degrees above their 1970-to-2016 May average, persuading households to purchase items that they forewent in February and March when the weather was unusually cold,” said Tombs.
“The average level of non-food sales in the first five months of 2018 is exactly the same as in the last five months of 2017, so the underlying trend in sales still looks pretty flat,” he added.
Chris Williamson, Chief Business Economist at IHS Markit, pointed to the rise in wages as helping to fuel spending. Data published in April showed that wage rises outstripped inflation for the first time in more than a year, increasing 2.8% at time when inflation was 2.7%.
He too is cautious. Consumers were spending while the sun shines, he said, but given the economic and political backdrop that could change quickly.
“Households remain concerned by the outlook, worried by rising prices and, in some cases, the spectre of higher borrowing costs, as well as wider uncertainty about the economy and political stability, both at home and abroad,” he told Yahoo Finance UK.
While the football World Cup – which starts today in Russia – might help boost spending on alcohol and TVs, it is likely to be temporary. “It’s not a game changer,” said Williamson.
