Retail spending surged in May, rebounding from a decline in April, thanks to improved weather, lower inflation, and increased consumer confidence.
According to the Office for National Statistics (ONS), retail sales volume rose by 2.9% in May, reversing the previous month’s 1.8% drop. The rise was particularly notable in the clothing and footwear sectors, where sales increased by 5.4%, driven by summer stock clearance.
Kathleen Brooks from XTB suggested that the strong clothing sales could be partly due to special events, such as the Taylor Swift tour, which is expected to boost the UK economy by £1 billion.
Consumer confidence also hit its highest point in two and a half years, contributing to the retail sales increase.
Online sales rose 5.9% in May, reflecting broader trends in consumer spending.Over the three months to May, retail sales grew by 1%, though they remained 0.5% below pre-Covid levels from February 2020. Retail sales only account for a portion of consumer spending, excluding areas like car purchases and dining out.
However, broader economic indicators show mixed signals. The S&P Purchasing Managers’ index revealed slower economic growth in June, attributed to uncertainty around the general election. The index fell to 51.7 from 53.0 in May, suggesting a deceleration in economic activity.
Despite these concerns, analysts like Rob Wood from Pantheon Macro view the retail rebound as promising. He attributes the recovery to improved weather and rising real wages. Online sales also grew by 5.9% in May, indicating more than just seasonal effects.
On the fiscal side, public borrowing reached £15 billion in May, up £800 million from the previous year and marking a high for the month since 1993.
This borrowing figure was slightly lower than forecasts but reflects the ongoing fiscal challenges facing the government.