Grim spring gives retailers a headache

Households bought less at the shops in May despite improving pay packets and low inflation as the bad weather put them off updating their summer wardrobes.

The amount bought in the retail industry increased by just 0.2 per cent, compared to a downwardly revised rise of 0.9 per cent in April, according to the Office for National Statistics.

The monthly slowdown was driven by a 1.6 per cent drop in clothing sales, the biggest fall since September 2014. In contrast, food stores had a rare good month, with volumes up 0.6 per cent, the biggest increase since the end of last year. On an annual basis sales were 4.6 per cent higher.

May’s slowdown came despite pay growth for the first part of the year defying expectations, climbing to 2.7 per cent. Wages rose by 3.3 per cent in the private sector but public sector pay was up by 0.3 per cent.

At the same time, inflation stood at just 0.1 per cent in the year to May, while average store prices fell by 2.7 per cent compared with the same month last year. This is the 11th consecutive month of annual falls.

Nevertheless, economists are confident that consumer spending will improve, helping the economy to bounce back from the disappointing 0.3 per cent growth recorded in the first three months of the year.

Samuel Tombs, senior UK economist at Capital Economics, said: “While retail sales volumes only edged up in May, the underlying picture looks robust. With pay growth picking up, inflation set to remain below 1 per cent for another six months and job creation still strong, there is no reason to expect growth in retail sales to peter out soon.”

Dominic Bryant, an economist at BNP Paribas, added: “Sales growth looks set to be stronger in the second quarter than in the first quarter. This suggests household spending growth will strengthen from its Q1 pace of 0.5 per cent and fits with our view that overall GDP growth will bounce back smartly. ”