Royal Wedding boosted sales, but not for long
Friday 20 May 2011
Economists urged "extreme caution" about reading too much into a strong rebound in retail sales last month, as chains were boosted by the hottest April on record, a glut of bank holidays and the Royal Wedding.
The Office for National Statistics said that sales volumes rose by 1.1 per cent last month, compared with the 1 cent rise forecast by economists and the 0.2 per cent rise seen in March.
The grocers benefited from shoppers spending on party food in the hot weather and ahead of the wedding on 29 April, while footwear and fashion chains enjoyed an early spike in customers purchasing summerwear.
While the figures provided a ray of hope to the sector, many chains expect to face tough trading for at least another year. Retailers including Dixons Retail, the owner of Currys and PC World, HMV, Mothercare and Thorntons have issued profit warnings recently. Many others have posted disappointing trading figures.
According to ONS, sales by value, including price rises, rose by 1.6 per cent between March and April. However, many economists said the figures provided little insight into the true state of consumer spending.
Barry Knight, head of retail at Grant Thornton UK, said: "Leaving aside the supermarkets which continue to trade satisfactorily, we are hearing from retailers on the ground across pretty much every single sub-sector that underlying trade is still weak. In many cases we are even starting to see online sales being affected due to weakening consumer demand." The buoyant ONS survey follows even perkier data from the British Retail Consortium, which reported that like-for-like retail sales rose by 5.2 per cent in April.
On the ONS figures, Nida Ali, the economic advisor to the Ernst & Young Item Club, said: "We would be extremely cautious about reading too much into these figures. Despite the upbeat April data, sales volumes rose by just 0.2 per cent in the three months to April."
Ms Ali said: "The broader picture of a weak consumer outlook remains unchanged. High inflation is eroding real incomes – evident particularly from this month's inflation and wage growth data – and the labour market remains weak. Moreover, highly indebted households are eager to pay down debt, and this combined with strict fiscal consolidation means that cautious consumers will be reluctant to loosen their purse strings. Indeed, UK retailers will have to be more resourceful than ever to secure a share of their wallets."
Compared with last year, ONS said that sales revenues rose by 2.8 per cent in April, while sales by value, including price rises, leapt by 6.2 per cent. Food shops were the star performers, growing sales volumes by 1.4 per cent – the first rise for 15 months – and by 6.1 per cent by value, as grocers pushed through price rises.
Among non-food chains, non-specialised stores enjoyed the biggest rise of 4.4 per cent in sales volumes. Textile, clothing and footwear stores also benefited from 2.2 per cent growth.
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