Heavy discounting and promotions boost retails sales

Heavy discounting and promotions at department stores helped pull in cash-strapped consumers and push up retail sales last month, official figures showed today.

Retail sales volumes increased 1.4% in May, following a revised 2.4% drop in April, the Office for National Statistics (ONS) said. City analysts had expected a rise of around 0.8%.

The increase was driven primarily by a 6.2% surge in fuel sales, as March's fuel strike threat continued to have an impact, but there was evidence that a fall in prices at department stores also lifted volumes. Stripping out the impact of fuel, total retail sales volumes increased by 0.9%.

The rate of inflation has fallen back throughout 2012, from a 5.2% peak last September to 2.8% in May, as weak economic growth has weighed on company's pricing power.

Total retail sales plunged in April as heavy rain hit clothing and footwear retailers.

A bright spell of sunshine later in May had a small impact on the clothing sector, the ONS said, which rebounded after a dismal April to record 3.4% growth in sales volumes.

Non-specialised stores - or department stores, such as John Lewis and House of Fraser - saw volume growth of 0.8% on the month and 11.3% when compared with May last year.

The ONS estimates that the price of goods in department stores on average have fallen 2% in the last 12 months.

Discounting and promotions were also seen in so-called other stores, a broad category including computers, books and newspapers and toiletries and cosmetics.

Food sales had a weak month, growing just 0.2%, but the survey period ended on May 26 and did not include the final run-up to the Queen's Diamond Jubilee, which is expected to boost sales in June's survey.

Non-store retailing volumes, which include internet sales, increased 1.5% on the month.

Consumers spent £26.4 billion in May compared with £26 billion in the previous month.

The average weekly amount spent online is now up 22% when compared with a year ago, at £510.9 million.

Alan Clarke, economist at Scotiabank, said: "The trend in consumer spending should be improving as the burden from non-discretionary spending, that is food and energy, continues to ease, which makes more room for faster discretionary spending."

He added: "The trend in retail sales should therefore be upwards from here, helping to contribute to better news for growth as the year progresses."

Samuel Tombs, UK economist at Capital Economics, said the increase in sales reflected "temporary factors that depressed spending in April" and should not be interpreted as a sign that consumers have "loosened their purse strings".

He said: "There are few signs that a sustainable recovery in retail spending is under way yet."

PA