Retail sales data, May 2017 - PwC comments

May 18, 2017

In response to the latest retail sales data, Andrew Sentance, senior economic adviser at PwC, commented:

"Although retail sales bounced back in April, we should be cautious in reading too much into this. The pattern of retail sales in March and April is traditionally very sensitive to the timing of Easter, so it makes sense to look at spending patterns over a number of months.

"The volume of retail spending in the past three months is just 0.3% up on the previous three months – representing an annual growth rate of just over 1%. This compares with 4-5% annual retail spending growth in the three years 2014-16.

"A significant retail slowdown is underway, as real wages are squeezed by higher inflation and slower employment growth. Consequently, consumers are likely to cut back on some areas of discretionary spending over the next couple of years as they face higher bills for their regular household expenses.

"We cannot expect the consumer to be such a strong driver of growth in 2017 and 2018 as in the past few years. As a result, the growth of the UK economy will slow - and we are likely to see further confirmation of this slowdown as we move through this year."​

Kien Tan, retail director at PwC, added:

"In April 2017, retail sales increased by 2.3% compared to March 2017 and by 4.0% compared with April 2016, partially reflecting a burst of good weather and shoppers coming out in force over the late Easter long weekend.

"While retail sales statistics are volatile from month to month, and the longer term prognosis from our economists remains cautious, these better-than-expected figures are echoed in PwC's upcoming consumer sentiment survey of 2,000 people across Great Britain.  

“The shoppers we surveyed said they are still relatively confident about their own personal prospects. Despite political and financial volatility, consumer sentiment has declined only slightly since the beginning of the year. Looking back at previous PwC surveys, consumers remain more optimistic today than in the post-recessionary period between 2008 and 2014.

“Sentiment amongst young people in particular remains positive, with 44% of 18-24 year olds and 31% of 25-34 year olds in our study believing their disposable income would increase over the coming year, compared with only 19% and 22% respectively saying it would decrease.

“The majority of 18-25 year olds also said that they would spend more in the coming year on beauty and personal care, clothing and accessories, and health and wellbeing, in contrast to older people who expect to rein in their spending in every area except for on groceries."


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