UK consumers will increase their spending despite the bite of inflation

LONDON, May 26, 2010 (Reuters) – British consumers picked up the pace of their spending last month and sales in the three months to April rose by the most since mid-2021, suggesting some impact of rising inflation. .

Sales rose by a better-than-expected 0.5% in April, the Office for National Statistics said on Friday, as unusually heavy rain kept shoppers at home.

Economists polled by Reuters had forecast a 0.3% increase in April, as welfare payments rose for many low-income families.

In the February to April period, sales rose 0.8 percent from the previous three months, the biggest increase in the three months to August 2021.

Deloitte’s head of retail, Oliver Vernon-Harcourt, said: “April saw a surprising increase in retail sales despite continued inflation.”

“The economic environment remains incredibly difficult for many, but consumer confidence is slowly improving from last year’s lows.”

Sterling rose against the US dollar and the euro after the data was published.

Emma Mogford, fund manager at Premier Mitton Monthly Income Fund, said the rise in wages was covering some of the cost of living. “But any increase in unemployment later in the year could dampen confidence once again,” she said.

Inflation fell to 8.7 percent from 10.1 percent in April, but this was a smaller-than-expected fall and inflationary measures rose, data published earlier this week showed.

Bank of England Governor Andrew Bailey said on Wednesday that inflation could be “sticky and stubborn”.

Squeeze to tighten

There were some reminders in Friday’s figures of how the cost-of-living crisis is affecting household spending.

Retail sales in April were 3.0% lower than a year ago. Although it was the second-smallest decline since late 2021, food sales fell 2.7 percent year-on-year.

Martin Beck, chief economic adviser at forecasters EY ITEM Club, said the prospect of a further BoE rate hike would hit the finances of many people on fixed-rate mortgage deals and was unaffected by rising borrowing costs.

“At that point, 2.5 million households will face an increase in mortgage interest payments in 2023,” he said.

According to ONS chief economist Grant Fitzner, jewelers, sports retailers and department stores all had a good month in April.

JD Sports Fashion ( JD.L ) said it expects underlying profits to top 1 billion pounds ($1.26 billion) this year as young shoppers buy more trainers, joggers and hats for the first time this year. Marks & Spencer ( MKS.L ), one of Britain’s best-known retailers, is forecasting modest earnings growth this week.

“Despite high food prices continuing, supermarkets also recovered from the slump in March. However, these were partly due to lower volumes of fuel sold, despite lower prices,” Fitzner said.

Monthly food sales rose 0.7% after falling 0.8% in March.

A strike by public sector workers at retailers in April was behind a 2.2% drop in fuel sales in the month, an ONS official said.

($1 = 0.7923 pounds)

Writing by William Schomberg; Edited by William James, Andrew Cawthorne and Hugh Lawson

Our Standards: The Thomson Reuters Trust Principles.