Retail sales jumped more than expected in May as shoppers shrugged off Brexit fears and splashed out on summer clothing.
The volume of sales increased by 0.9% over the prior month, easily beating expectations of a more modest 0.2% rise and boosting hopes that the wider economy is not slowing.
The figures suggested that the possibility of a British vote to leave the EU on 23 June is not discouraging consumers from spending.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “Surging retail sales show that consumers aren’t paying much heed to warnings that the economy could nosedive if the UK opted for Brexit next week.”
A strong month in May pushed the annual rate of growth in retail sales to 6%, the strongest in eight months according to the Office for National Statistics data.
Again, it was far sharper than the 3.9% annual rise predicted by economists, partly because numbers for April were also revised up.
Last month shoppers were encouraged by spells of good weather, pushing clothing sales up 4.3% over the month as consumers refreshed their wardrobes with summery items. It was the biggest monthly rise in more than two years.
Clothing sales were weaker in April when unseasonably cold weather discouraged shoppers from buying summer clothes.
The retail sales data was the latest evidence that the UK economy was in decent shape in May, boosting hopes that a feared slowdown in the second quarter will not come to pass.
The economy grew by 0.4% in the first quarter, and economists had feared that a combination of uncertainty over Britain’s membership of the EU, as well as global growth concerns, would trigger a significant UK slowdown between April and June.
Alan Clark, an economist at Scotiabank, said: “Retail sales, combined with the stronger than expected industrial production data earlier in the month are suggesting that second quarter gross domestic product could be very respectable – maybe no slowdown at all compared with the first quarter. That is contrary to previous worries that we would see near-zero GDP.”
Martin Beck, senior economic adviser to the EY Item Club, said economic growth in the second quarter could outpace the first three months of the year.
The latest ONS figures showed retail sales growth was being supported by sharp price cuts, as retailers offer hefty discounts to attract shoppers amid intense competition in the sector. Retail prices were 2.8% lower in May than a year earlier.
Scott Bowman, UK economist at Capital Economics, said consumer spending was likely to be the main driver of economic growth in the coming months. “Looking ahead, assuming a vote to remain in the EU, retail spending should keep up a strong pace. And a vote to leave shouldn’t hit spending too much. After all, consumer confidence is still at a historically high level and real pay growth remains supportive,” he said.
“Accordingly, with net trade unlikely to provide much support to GDP growth – as exporters probably won’t see the full benefit of the recent fall in sterling for some time yet – consumer spending will continue to drive the recovery.”
