UK retailer optimism hits 27-year high as May sales jump

Summer has arrived early in the UK, according to one important domestic survey. Sales growth surged in May and expectations for June hit their highest level in 27 years, the latest Confederation of British Industry (CBI) survey suggests.

OK, first let’s qualify that statement. The survey covers UK sales volumes and it speaks to 134 companies, around half of them retailers. But it still gives us some good guidance to what’s happening out there.

The CBI, which represents 190,000 UK businesses, said 63% of those store retailers expect sales to rise in June and only 4% believe a fall is likely, the highest balance since 1988.

The retailers also reported May was their best month in volumes sold since the start of the year. The CBI index showed the UK retail sales balance rose to +51 in May, far surpassing analysts’ expectations for +17, and up sharply from +12 in April.

The measure of expected sales for June rose to +58, the highest reading since September 1988, and up from +40 in May.

Fresh signs of buoyant consumer spending suggest the service sector is strong enough to keep driving the recovery, analysts say.

“Low inflation, which we expect to remain below 1% for the rest of the year, has given household incomes a much-needed boost and greater spending power,” said Rain Newton-Smith, director of economics at the CBI.

“Overall the outlook is bright for firms on the high street, but challenges still remain,” Newton-Smith added.

Steve Smith, UK managing director at Nielsen, told The Times newspaper: “Consumer confidence in the UK continues to rise. The UK is one of the fastest-growing major economies, unemployment is falling and people are benefiting from zero inflation and lower prices in supermarkets and petrol stations.”

Howard Archer, chief UK and European economist at IHS Global Insight, said: “It is looking increasingly likely that robust consumer spending will help the UK economy to regain momentum in the second quarter.”

Quarterly data also released by the CBI on Tuesday also showed that retailers’ overall assessment of the business situation improved to +20, the highest reading since last August, from +11 in February.

Official data last week showed UK retail sales surged in April as consumers took advantage of falling prices, and unusually warm weather encouraged shoppers to buy new clothes.

• Department stores sales bounced back in May, seeing a 98% rise and outperforming the wider retail sector following a 47% drop in April. Clothing sales built on an increase of 58% during April to report growth of 62% in May, according to CBI survey. Footwear and leathergoods enjoyed a 57% increase. However, growth of internet sales slowed to 38%, lower than the expected 59% increase, but the CBI has predicted a 49% rise in June.

• Britons had an extra £17 a week in their pockets in April compared with the same time last year. Asda’s monthly income tracker showed that families across the UK have £187 a week to spend on the things they want, rather than the items they need, 10% higher than April 2014.

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