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Cool weather hits UK retail sales in May, boding poorly for economy in second quarter

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Cool weather hits UK retail sales in May, boding poorly for economy in second quarter
FILE PHOTO: A shopper reaches for a box of tea in a supermarket in London, Britain April 11, 2017. REUTERS/Neil Hall   -   Copyright  Neil Hall(Reuters)
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LONDON, June 20 (Reuters) – Cold weather in May prompted the biggest drop in British retail sales this year as shoppers delayed buying summer clothes, according to data that added to signs the economy is on track for a weak second quarter.

Monthly retail sales volumes contracted 0.5%, the Office for National Statistics said, as expected in a Reuters poll of economists and following a 0.1% fall in April.

Compared with May 2018, sales were up by 2.3%, the smallest annual rise since October last year. The Reuters poll had pointed to growth of 2.7 percent.

The second consecutive monthly slide in retail sales boded poorly for overall growth in the second quarter for an economy struggling with Britain’s Brexit crisis. Official data has already shown the economy contracted sharply in April.

Until now, consumers have largely taken Brexit in their stride, helped by stable inflation and stronger growth in wages.

That has helped the world’s fifth-biggest economy at a time when many companies have been cutting back on investment because of uncertainty about Brexit.

The ONS said unseasonably cold weather hit demand for clothing and footwear sales, which fell 4.5% on the month — the biggest drop since July 2015.

“We see quite a mixed picture across the rest of the sector as the decline in department store sales continued (in the three months to May), with no growth since September of last year,” ONS statistician Rhian Murphy said.

Underlining the squeeze on retailers’ profit margins, sales in value terms rose only 2.7% in the year to May, the smallest rise in nearly three years.

Retailers themselves have reported mixed fortunes of late.

Earlier on Thursday, Dixons Carphone, Britain’s biggest seller of electricals and mobile phones, reported a 22% fall in full-year profit, reflecting falling mobile sales in a tough market, and warned of another big decline in the current year.

Fashion brand Ted Baker this month reported an “extremely difficult” start to the year, although online fashion group Boohoo bucked a tough retail market with robust sales growth.

(Reporting by Andy Bruce and William Schomberg)

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