UK Retail Sales Slump Despite Rise in Consumer Confidence

UK Retail Sales for April have come in considerably lower-than-expected this morning, marking the second consecutive contraction and the sixth in the last twelve months.

Poor weather was cited as a driver behind the fall in sales, as footfall fell across many parts of the country. The fall in footfall was perhaps unsurprising given that last month received 155% of the average rainfall for April while sunshine hours were 21 percentage points below average.

Retail sales slumped 2.3% between March and April, missing forecasts of a more marginal 0.4% fall. April’s figures also represented the greatest fall in retail sales in four months and spending dropped across most sectors. When looking at non-food stores, sales volumes fell by a much more severe 4.1% in April (the joint lowest print since January 2021).

On an annualised basis retail sales sunk 2.7%, again far worse than the market consensus which was forecasting a 0.2% contraction.

According to the ONS, retailers cited the cost of living and rising fuel prices as key factor for the fall in volumes.

The fall in retail sales came despite rise in consumer confidence. The latest figures from GfK indicated that consumer confidence rose to its highest level in two years, hitting -17 points. Four out of the five components of the survey saw an improvement, with a rise in the outlook for personal finances being cited as the key driver.

Major purchases were the only component where consumers responded less positively, indicative of the impact of higher borrowing costs and expectations of rates being higher for longer.

In the UK, energy bills are set to fall to their lowest levels in two years, as the regulator has reduced prices this morning, effective from the 1 July. The move brings the cap down to £1,568 per annum for a typical household. The price reflects a significant reduction in natural gas prices, which have fallen around 35% since the autumn and more than 80% from their peaks back in August 2022.

The news will be welcomed by households but is set to create a dividing line on the campaign trail, according to the Times. Team Sunak is set to call out Labour’s net zero policies and the lack of honesty around the significant costs that the transition will impose on households. The other side of that coin will be Labour accusing the Tories of leaving the UK vulnerable to energy price shocks, despite an abundance of natural resources and renewable opportunities.

As the campaign gets underway, some seats to look out for will be Burnley, Warrington South, and Carshalton and Wallington.

The Labour party will be keen to win back Burnley which formed part of its so called ‘Red Wall’. Before losing the seat to the Conservatives, the constituency had either been in the hands of the Lib Dems or Labour since 1910.

Meanwhile the Conservatives will be looking to hold Warrington South which it currently holds by a slim majority of 2,010. The constituency has changed between parties with the Labour party holding it for much of Major’s years but passing on to the Conservatives in 2010. Labour then won it in 2017 before losing it again to the Conservatives in 2019.

Elsewhere, the Liberal Democrats will be looking to target Carshalton and Wallington which it lost to the Conservatives in 2019. Here, the Tory’s have a majority of just 692 and since the Lib Dems had the seat from 1997 to 2019, they will be keen to claw back what is sometimes considered to be the Conservative’s blue wall in the home counties.

Party leaders yesterday kick-started their election trails, as the first full day of campaigning started. Sunak is currently in Inverness ahead of flying to Belfast as he continues his whistle-stop tour of the UK. Meanwhile, yesterday Sir Keir Starmer headed to Priestfield Stadium, in Gillingham, Kent while the Liberal Democrat leader Sir Ed Davey headed to Cheltenham town centre to launch the party’s campaign.