Commenting on the surprise rise in UK retail sales in May Martin Beck, senior economic advisor to the EY ITEM Club, said:
“After a strong rise in retail sales volumes in April, sales volumes rose again in May leaving the annual growth rate at 4.6%, the 26th consecutive year-on-year rise. Food volumes saw their strongest performance since last December and fuel purchases rose by 0.3%, with demand supported by a 10% annual fall in petrol prices.
“May’s growth means that even if retail sales stagnate in June, volumes in Q2 will be 1% above the level in the first quarter. So another solid gain in consumer spending looks very likely.
“In light of continued growth in sales, fears that falling prices would encourage consumers to delay spending remain very wide of the mark. However, falling prices are bad news for retailers margins’, particularly in light of the latest earnings data which showed earnings growth in the retail sector rising at an annual rate of 5% in the three months to April.
“Overall the picture for retailers continues to look bright. Ever more convincing evidence of a recovery in pay rises, with the latest labour market numbers showing real pay growth finally back to the pre-crisis norm, very low inflation, cheap credit and elevated levels of consumer confidence represent a cocktail of positive factors. With plentiful tailwinds supporting the consumer, the retail sector’s prospects remain at their brightest since 2007.”