British retail sales bounced back in May after a dismal April as sunnier weather encouraged shoppers to buy clothes and shoes, raising hope that the country may yet avoid a longer slump. Britain, which fell into its second recession in four years between October and March, is in dire need of a boost, and policymakers pin hopes on consumer spending because exports and business morale have been hurt by the euro zone debt crisis.
The government has announced a number of schemes aimed at supporting lending and infrastructure spending, while the central bank has indicated that another cash injection to support the economy is on the way. A decent performance by retailers and strength in the manufacturing of consumer goods revealed by an industry survey, which showed an unexpected improvement in British factory orders in June, provided some rare good economic news.
"The economy is stronger on the consumer side and still showing signs of growth in the overall service sector," said David Tinsley, economist at BNP Paribas. The Office for National Statistics said on Thursday that retail sales volumes rose 1.4 percent on the month in May - a notch above economists' forecasts for an increase of 1.2 percent - to give an annual rise of 2.4 percent.
Retail sales slumped in the previous month, which was the wettest April on record, while weak fuel sales following panic-buying in March due to a planned strike by truck drivers compounded the fall. The ONS said the increase in sales last month was driven by a 3.4 percent monthly rise in sales of clothes and footwear. Discounting boosted trade at shops such as department stores, with their sales 11.3 percent higher on the year - the highest rise since February 2000.
"The seemingly shy sunshine, hardly seen since March, had created pent-up demand for summer goods which was finally unleashed," said Stephen Robertson, British Retail Consortium Director General. "Modest sales of coats and carpets gave way to much better sales of T-shirts and barbecues as interest finally turned outdoors."
Sellers of other goods are also benefiting. Dixons Retail, Europe's second-biggest electrical goods retailer, said sales at its British and Irish stores open for over a year rose 8 percent between February and April and that an improving trend in group sales had continued since then.
Britons have cut back spending since the 2008-2009 recession as rising prices swallow up meagre wage increases, driving a number of well-known high street names out of business. But consumption has increased slightly in the final quarter of 2011 and the first three months of 2012, after declining the four previous quarters. In a sign that some of the pressure on household incomes is easing, the annual rise in retail prices measured by the implied deflator eased to 0.9 percent - the lowest since October 2009 - in line with the recent fall in consumer price inflation to 2.8 percent, also the lowest in two and a half years.
While easing inflation may help cash-strapped Britons to spend more, the dangers from the euro zone crisis loom large. In an unexpected sign of resilience, the June survey by the Confederation of British Industry showed an improvement. "Despite facing continued instability within the euro zone, UK manufacturers have seen a modest rebound in orders from both their domestic and export markets," said CBI chief economic adviser Ian McCafferty.