James Smith, Developed Markets Economist at ING, notes that UK retail spending rose by 1.3% in May, driven predominantly by food and clothing.
“We don’t think retailers are out of the woods just yet. May was a consistently warm month for much of the UK, particularly over the Bank holiday weekend at the start of the month, which encouraged consumers to head to the shops.”
“Consumer confidence has picked up slightly but remains low by historical standards, particularly when compared to Europe and the US, where in many cases shoppers are the most optimistic they’ve been since the early-2000s.”
“Alongside slower demand, retailers are grappling with higher business rates and increased wage costs.”
“So while our base case is for the Bank of England to hike rates in August, the challenges facing the retail sector are probably the biggest risk to this view.”