A surprise surge in retail sales in April helped push the pound to its highest level in eight months as Britain’s consumers shrugged off concerns over falling living standards.
Warm weather and the Easter holidays encouraged shoppers back onto UK high streets, with retail sales up 2.3% over the month according to the Office for National Statistics. It was more than double the 1% rise forecast by economists, and the biggest monthly rise since January 2016.
April’s rise was a significant rebound compared with March, when sales fell 1.4%, easing fears of an imminent consumer slowdown and signalling a decent start to the third quarter.
The stronger-than-expected figures were at odds with broader expectations of a slowdown in consumer spending this year, as prices begin to outpace wage growth, putting increasing pressure on household budgets.
Falling real pay is already a reality for UK workers, with average earnings rising by 2.1% year on year in the three months to March – slower than the 2.3% rate of inflation in the same period.
“The latest data showed shoppers continued to shrug off any Brexit and political uncertainty with retail sales beating even the most optimistic expectations,” said Richard Lim, chief executive of the consultancy Retail Economics.
“Despite the surge in inflation and squeeze on households’ finances, consumers were out in force during the Easter break with the warm weather driving sales across the sector.”
The UK has relied heavily on consumers to drive growth since the financial crisis, with other sectors of the economy, such as manufacturing and construction taking a bigger hit.
However, with inflation expected to pick up to about 3% and pay growth expected to remain weak, household budgets are likely to come under increasing pressure.
Alan Clarke, an economist at Scotiabank, said that despite the strong retail figures in April, he expected the consumer slowdown to materialise in the coming months, which in turn would weigh on the wider economy.