U.K. Retail Sales Rise More Than Forecast on Warm Weather

U.K. retail sales rose more than economists forecast in April as warm weather and the extra bank holiday for the Royal Wedding boosted consumer spending.

Sales including auto fuel climbed 1.1 percent from March, when they rose a revised 0.3 percent, the Office for National Statistics said today in London. The increase was the biggest for an April since 2002 and exceeded the 0.8 percent median forecast of 20 economists in a Bloomberg News survey. From a year earlier, sales increased 2.8 percent.

Britons spent more during two consecutive holiday weekends at the end of April to mark Easter and the wedding of Prince William and Kate Middleton. The Bank of England held its key interest rate at a record low this month on concern that an increase in borrowing costs would dent spending and undermine the recovery, minutes of the decision yesterday showed.

“We got a boost last month from Easter and the wedding, but we’re going to treat it as a one-off,” said Peter Dixon, an economist at Commerzbank AG in London. “If we get back to a sluggish trend for consumers and investment, rates could be on hold past November.”

The pound pared its loss against the dollar after the data were published. It traded at $1.6175 as of 9:31 a.m. in London, little changed on the day.

Food Sales

Excluding fuel, sales rose 1.2 percent in April from the previous month and were up 2.7 percent on the year, the statistics office said. Food sales jumped 2.2 percent on the month, the most since May 2008, clothing sales increased 3.2 percent and sales at household-goods stores rose 1.5 percent.

The statistics office said it was an “unusual month,” citing the impact of the warmest April on record, the extra bank holiday and the wedding on April 29.

An index of consumer confidence fell to 43 in April from 45 in March, Nationwide Building Society said today. A measure of shoppers’ willingness to spend on household goods and major purchases fell 5 points to 62.

Mothercare Plc, a retailer of clothes for children and pregnant women, said yesterday it will shut more than a quarter of its U.K. stores and expand overseas after full-year profit fell 72 percent. Alliance Boots Holdings Ltd., owner of the largest U.K. drugstore chain, said May 16 it is “planning for consumer demand to be subdued” over the coming year.

“An increase in bank rate in current circumstances could adversely affect consumer confidence, leading to an exaggerated impact on both spending and firms’ perceptions of their desired productive capacity,” the majority of the Bank of England’s Monetary Policy Committee said yesterday.

BOE Rate

The central bank held the key rate at 0.5 percent this month, even as the fastest inflation in more than two years squeezes household finances. Consumer prices rose an annual 4.5 percent in April, the fastest since October 2008.

The retail sales deflator, a measure of changes in shop prices, rose to 3.7 percent in April from 3.4 percent in March, the statistics office said. Excluding auto fuel, the deflator rose to 2.7 percent, the highest since June 1996, from 1.9 percent. The deflator for food sales jumped to 4.6 percent from

4.1 percent.