Household consumption outlook uncertain ahead of budget cuts
By William L. Watts, MarketWatch
LONDON (MarketWatch) -- British retail sales volume rose by 0.3% in April, continuing a rebound from a slowdown earlier this year that economists tied to rough weather and the expiration of a temporary cut in value-added tax.
Retail sales rose 0.3% compared to March and were 1.8% higher compared to April 2009, the Office for National Statistics reported Thursday. Both figures were in line with expectations. March sales were revised up to show a 0.5% monthly rise.
The British pound (CUR_GBPUSD 1.4339, -0.0119, -0.8231%) showed little reaction to the data, changing hands in recent action at $1.4364 versus the U.S. dollar.
Excluding auto fuel sales, which tend to be volatile, retail volumes were up 0.1% from March and 3% compared to a the same month last year.
Food store sales fell 1.7% compared to April 2009, while non-food stores saw a 5.9% year-on-year rise, the ONS said. Textile, clothing and footwear stores led the rise with a 9.5% annual increase, while non-specialized stores rose 9.4% and other stores were up 4.2%.
"Overall, today's data supports the picture of an established recovery in the retail sector following the disruptions at the beginning of the year," said Joerg Radeke, economist at the Center for Economic and Business Research. "This is even more remarkable as low earnings growth and above-target inflation have a negative impact on spending power."
Chiara Corsa, U.K. economist at UniCredit Bank, said the data "might be an early signal that after a (likely) weak outcome in [the first quarter] we will see a rebound in households' spending in the second quarter."
Radeke and Corsa agree, however, that the outlook for consumption is uncertain amid expectations Britain's new government begins implementing deficit-reduction measures.
"A more precise assessment will only be possible after the approval of the emergency budget in late June," Radeke said.
