Retail sales increased amid the rising costs of living

Consumers in the UK carried on spending last month despite the highest inflation rate in 40 years, providing high street and online retailers with a surprise boost.

The Office for National Statistics (ONS) said there was a 1.4% monthly jump in retails sales in April, but said the trend was still weak and part of the increase might be driven by an increase in supermarket sales led by alcohol and tobacco and sweet treats. Off-licences also reported a boost, possibly due to people staying in more to save money.

Clothing sales had a strong month, especially online, with some retailers suggesting consumers were purchasing clothes for summer holidays and weddings.

Over the three months to April is considered a better guide to the underlying trend than one month’s data – retails sales fell by 0.3% on the previous quarter. The ONS said the trend had been down since last summer.

The rise in spending came as a surprise, with the arrival of increases in National Insurance, petrol, council tax and broadband together with the new energy price cap, which did lead to consumers cutting back on spending - especially the unnecessary and luxury purchases last month.

The ONS reported the annual inflation rate jumped from 7% to 9% in April, while the latest snapshot of consumer confidence from GfK showed the mood at its gloomiest since its records began in 1974.

The increase in retail sales may by due to near full employment and the ability of consumers to tap into savings accrued during the pandemic. This may be preventing shoppers becoming overly cautious, despite the costs of living challenges associated with high levels of inflation.

An economist states that the unexpectedly strong 1.4% month-on-month rise in retail sales in April suggest that the cost-of-living crisis hasn’t caused consumer spending to collapse and means that the economy may have a little more momentum than we thought.

The ONS said the volume of retail sales in the latest three months was just over 4% higher than before the coronavirus pandemic first affected the UK economy in early 2020. Over that period, the percentage of sales online has increased from 19.9% to 27%.

Get in touch

If your business requires a review and some possible restructuring to be more effective and efficient, please contact our Restructuring Team for a conversation.

You can also check out our articles and guides in our Restructuring Knowledge Hub.