U.K. Retail-Sales Surge Boosts Hopes for Second Quarter

  • Warm weather sees clothing sales jump most in over two years
  • European soccer championship seen helping sales in June

U.K. retail sales climbed more than economists forecast in May as warm weather spurred demand for summer clothing and department stores offered promotions.

The volume of goods sold in stores and online increased 0.9 percent following an upwardly revised 1.9 percent gain in April, figures from the Office for National Statistics showed Thursday. The median estimate in a Bloomberg survey was for a 0.2 percent gain. Sales excluding auto fuel jumped 1 percent.

The figures may boost hopes that the economy averted a sharp slowdown in the second quarter, with sales between March and May rising 1.5 percent -- the fastest three-monthly pace since November. It suggests consumers buoyed by record employment and growing purchasing power are continuing to drive growth despite the upcoming Brexit referendum.

A fall of 1 percent in June would leave sales unchanged on the quarter, the ONS said. Sales may get a further boost this month from the European soccer championship in France as people upgrade televisions and spend more on food and drink, analysts say.

The pound dropped to a two-month low against the dollar as polls continue to give an edge to the “Leave” campaign with a week to go to the referendum on whether Britain should stay in the European Union. It was at $1.4090 as of 2:48 p.m. London time, down 0.8 percent on the day.

Weather Boost

In May, food sales rose 1.1 percent, while non-food sales gained 0.7 percent. Higher-than-normal temperatures boosted sales of clothing and footwear by 4.3 percent, the biggest monthly gain since March 2014. Sales at department stores rose 1.1 percent, helped by promotions. Total sales rose 6 percent in May from a year earlier, the fastest annual pace since September.

Measured by the deflator, prices at stores and petrol stations rose 0.4 percent on the month. The unadjusted value of sales was 29.2 billion pounds ($41 billion).

Retail sales, which account for 5.7 percent of gross domestic product, rose 1.3 percent in the first quarter instead of the 0.9 percent previously reported, though the revision is insufficient to affect overall growth, the ONS said.

Economists in a Bloomberg survey see economic growth slowing to 0.3 percent in the second quarter from 0.4 percent in the first. Industrial production and construction, together accounting for a fifth of the economy, both rose strongly in April.

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