May 24, 2019 / 12:08 PM / 25 days ago

UK shoppers pause in April after surge in spending

LONDON (Reuters) - British shoppers paused in April after three months of strong buying, according to official data that showed continued underlying strength in consumer spending even as the Brexit political crisis unfolded.

FILE PHOTO: A pedestrian walks towards a shop displaying a sale sign, in central London, Britain December 28, 2018. REUTERS/Peter Nicholls/File Photo

Monthly retail sales volumes were flat last month, the Office for National Statistics said, stronger than a median forecast for a 0.3% decline in a Reuters poll of economists.

During the three months to April, sales rose 1.8%, the fastest growth by this measure since August last year.

Consumer spending has been a bright spot for the economy amid the Brexit crisis, contrasting with cuts to business investment throughout 2018 and slower global economic growth.

Britain was originally due to leave the European Union on March 29 but the deadline has been pushed back to Oct. 31 as Prime Minister Theresa May failed to break an impasse in parliament on the terms of Brexit.

May said on Friday she would resign as leader of the ruling Conservative Party on June 7, paving the way for a new prime minister to try to take Britain out of the EU.

Consumers are gloomy about the outlook for the economy, according to surveys.

But strong job creation and rising pay growth have boosted their spending power, even if wages remain lower than before the financial crisis once adjusted for inflation.

Ruth Gregory, an economist with consultancy Capital Economics, said it was only the second time in the past 10 years that sales rose or remained flat for four consecutive months.

But she said the numbers would have been worse without a strong rise in clothing sales which were helped by the warm weather over Easter and price cutting.

A separate measure of retail sales suggested consumers turned more cautious in May. The Confederation of British Industry’s sales balance, adjusted for the time of year, was the weakest since March 2009.

Samuel Tombs, an economist with Pantheon Macroeconomics, warned against reading too much into the CBI’s figures which were based on a small number of retailers.

“A dip in retail sales in May certainty is plausible, as the boost from warmer-than-usual weather to clothing sales unwinds, but we strongly doubt that the sky has fallen in,” he said.

ONLINE SURGE

The contrast between strong growth in online sales in the ONS data — which hit a record high in the three months to April — and the problems of high street retailers underscored the fundamental shifts taking place in the industry, Duncan Brewer, retail partner at consultants Oliver Wyman, said.

“Retail used to be simple: consumers went to stores, browsed products, then bought what they wanted,” he said.

“Now, attracting consumer spending has become all the more competitive with the rise of new businesses, both big and small, which are successfully reaching new consumers online.”

Bricks-and-mortar stores hoping to survive would have to offer the kind of service that customers cannot get online, Brewer said.

Retailers themselves have reported mixed fortunes this month.

Morrisons, Britain’s No. 4 grocer, missed quarterly growth forecasts, blaming political and economic uncertainty and No. 3 player Asda warned of an “increasingly challenging backdrop”. But discounter B&M had its best ever Easter trading season.

Additional reporting by David Milliken; Editing by Catherine Evans

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