Consumers revelling in ‘noflation’ as retail sales rise

STRONG growth of 1.2% in April has been described as “no flash in the pan” by a senior economic adviser to the EY ITEM Club.

Martin Beck was responding to the strongest increase in figures since November with analysts pointing to warmer weather encouraging shoppers to splash out on summer clothes as a reason for the rise.

Clothing, footwear and textiles sales all rose 5.2% in April from March, the largest increase in four years, according to the figures released by the Office for National Statistics. (ONS).

The figures also showed sales up 4.7% from the year before.

Rising levels of disposable income as consumers enjoyed “noflation” – and more recently the first period of deflation in the UK since 1960 – and consumer confidence were cited as major factors of influence.

Beck said: “Retail sales saw the fastest growth in five months. The strong April number is no flash in the pan, with retail sales growth continuing to run at an annual pace of just under 5%.

“We had expected the total sales figure to rise strongly, given that the March data had been depressed by an unusually sharp decline in fuel sales, but there was a stronger than expected pickup across the non-fuel categories of spending as well. Clothing stores were the star performers.

“After a lengthy squeeze on household incomes, UK consumers are clearly enjoying the freedom afforded by falling prices on the high street and accelerating wage growth.

“We expect these factors to remain in place throughout the year, ensuring that consumer spending continues to offer strong support to GDP growth.

“Today’s data also reinforces our conviction that the current version of the GDP data for the early part of 2015 provides a poor indication as to the underlying strength of UK activity. We remain of the opinion that the data is likely to be heavily revised, but even if it is not, we should expect strong GDP figures for Q2.”

Beck’s views were echoed by Joanne Wright at personal insolvency specialist Begbies Traynor, based in Manchester.

“The latest set of strong results for the retail sector demonstrates that more people now how have more pounds in their pockets and are beginning to spend it on themselves,” she said.
“Textile, clothing and footwear stores saw the largest rise in sales for five years last month, with consumers now spending more on personal items than they are on food.
“But with spending on credit cards also increasing, it important that people remain in control of their finances.

“There are signs that interest rates may rise as early as later this year and for many, they should be making hay while the sun shines – with a few extra pennies in their purse, now is the perfect time for people to ensure they are prepared for any increases in mortgage payments that may be just around the corner.”