Retail sales should recover after "relentless" rain sparks April drop

(Alliance News) - UK retail sales fell in April, as miserable weather kept shoppers at home, but economists were optimistic this should prove a short-term blip.

On Friday, figures from the Office for National Statistics showed retail sales fell by 2.7% in April from a year prior. Sales had increased by 0.4% on-year in March, being revised up from being flat previously.

According to FXStreet, retail sales were expected to fall by just 0.2% annually in April.

Sales fell by 2.3% in April from March, following a 0.2% fall in March from February. March's reading was worse than consensus of just a 0.4% slip.

"Sales volumes fell across most sectors, with clothing retailers, sports equipment, games and toys stores, and furniture stores doing badly as poor weather reduced footfall," the ONS said.

Pantheon Macroeconomics Chief UK Economist Rob Wood said an early Easter and "relentless" rain caused a "collapse" in retail sales volumes in April.

Wood estimated this would cut 0.1 percentage points from April month-to-month gross domestic product growth, but he was "optimistic that retail sales will quickly bounce back."

He noted clothing sales volumes tanked 5.1% month-to-month in April, the biggest fall since December 2021, although food sales were "less bad," down 0.8% month-to-month.

Although the ONS adjusts the data for the timing of Easter, Wood felt a "fall of this magnitude suggests there may be some residual seasonality left in the data."

But he is "optimistic" that retail sales will "quickly bounce back."

"As - fingers crossed - rainfall returns to more seasonal norms the high street should see less disruption. Consumer real income growth continues improving as inflation falls. Meanwhile, April saw a national insurance tax cut, benefits raised in line with past inflation and a minimum wage hike that should boost consumer incomes."

Wood estimated those tax cuts and benefit increases would add 0.8 percentage points to real disposable income growth this year.

"With households already saving a larger fraction of their incomes than usual and reporting in ONS surveys that they have rebuilt their rainy day savings, we expect further increases in disposable income to feed through strongly to overall spending," he added.

Wood's forecast for 0.3% quarter-to-quarter GDP growth in the second quarter assumes GDP falls 0.1% month-to-month in April.

"Today’s data pose downside risks to that forecast, but with a retail rebound likely in May and June we don’t see a need to make changes to our forecast just yet," he added.

By Jeremy Cutler, Alliance News reporter

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