U.K. Retail Sales Fall Most in Two Years on Rain Effects

May 23 (Bloomberg) -- U.K. retail sales fell the most in more than two years in April as record rainfall reduced demand for clothing and fuel sales plunged.

Sales including auto fuel declined 2.3 percent from March, when warm weather helped lift sales by an upwardly revised 2 percent, the Office for National Statistics said today in London. The median forecast of 24 economists in a Bloomberg survey was for a 0.8 percent decline. Sales excluding fuel dropped 1 percent, the most for almost a year.

Consumer spending is being curtailed as inflation outpaces wages and unemployment remains close to a 16-year high. Marks & Spencer Group Plc (MKS), the largest U.K. clothing retailer, cut its sales forecast yesterday and said the economic environment is “challenging.” Stripping out the impact of fuel and wet weather, retail sales were still down on the month, the statistics office said.

“The underlying picture is sluggish,” said Ross Walker, chief U.K. economist at Royal Bank of Scotland Group in London. “Employment remains fragile and wage growth weak.”

The report came as minutes showed Bank of England policy maker David Miles maintained a push for more stimulus for the economy this month and several officials said their decision not to join his call was “finely balanced.” Deputy Governor Charles Bean said in a speech today that policy makers may need to resume asset purchases if there’s a significant worsening in the U.K. economy. The pound was trading at $1.5729 as of 11:25 a.m. in London, down 0.2 percent on the day.

Rain Impact

Sales were hampered by wet weather, with April registering the largest amount of rainfall for the month since records began in 1910, according to the Met Office.

A 5.2 percent decline in clothing and footwear led the drop as the weather hit demand for summer clothing lines. There was also a sharp fall in spending at garden centers as well as on watches, jewelry, fine art, sports equipment, games and toys, the statistics office said. Total non-food sales fell 1.7 percent while food sales fell 0.6 percent.

Sales of fuel plunged 13.2 percent, the most for any month since records began in February 1996, with retailers reporting difficulties in replenishing stocks after a wave of panic buying in March in anticipation of strike by tanker-truck drivers.

Incomes Squeeze

From a year earlier, sales including fuel fell 1.1 percent, the statistics office said. In the three months through April, sales growth slowed to 0.2 percent from 0.7 percent in the first quarter.

While U.K. inflation slowed more than economists forecast last month to 3 percent, wages rose just 0.6 percent in the three months through March, the least since 2009, as firms slashed bonuses. The unemployment rate was 8.2 percent in the period.

Shop prices, as measured by the retail sales deflator, rose an annual 1.7 percent in April compared with a gain 2.6 percent in March, the statistics office said.

Pessimism over the economic outlook as the euro-region crisis intensifies has driven down share prices. The General Retailers Index was down 1.4 percent today, extending its drop so far this year to 7.2 percent. The broader FTSE 350 index has fallen 6 percent.

The International Monetary Fund said yesterday that the U.K. economy requires further stimulus from the Bank of England and the government may need to introduce temporary tax cuts. Official figures tomorrow are forecast to confirm that gross domestic product shrank 0.2 percent in the first quarter, marking the first double-dip recession since 1975.

Retail sales account for less than half of total consumer spending and do not include purchases of cars or eating out. Internet sales accounted for 8.5 percent of all retail sales values in April.

To contact the reporters on this story: Fergal O’Brien in London at fobrien@bloomberg.net; Gonzalo Vina in London at gvina@bloomberg.net

To contact the editors responsible for this story: Craig Stirling at cstirling1@bloomberg.net; To contact the editors responsible for this story: James Hertling at

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