In-store and online spending rebounded strongly last month as better weather, falling inflation and rising consumer confidence boosted spending.
The Office for National Statistics’ monthly update showed retail sales rose 2.9% in May after a weather-related drop of 1.8% in April.
The ONS said most retailers had a better month in May, with strong increases in the clothing and footwear and homewares sectors. Apparel sales rose 5.4% as retailers moved summer inventory.
Kathleen Brooks, director of research at the company XTB said the strength of apparel sales may have been affected by one-off events. “Could it be the Taylor Swift effect where people – including me – are splurging on new clothes ahead of her Eras tour, the UK leg of which is set to add £1bn to the UK economy?”
The official data followed the release of GfK’s latest consumer confidence snapshot, which showed sentiment at its highest level in two-and-a-half years.
In the three months to May – a better guide to the underlying trend in spending – retail sales rose 1%. Even so, they remained 0.5% below the level just before the start of the Covid pandemic in February 2020.
Retail sales account for less than half of total consumer spending and exclude categories such as car sales, dining and hotel accommodations.
S&P’s broader monthly survey of the state of the economy found that the pace of growth eased in June after Rishi Sunak called a snap election.
The S&P purchasing managers’ index showed activity grew at the slowest pace in seven months, with weakness concentrated in the services sector.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said: “The flash PMI data for June signaled a slowdown in the pace of economic growth, suggesting that GDP is now growing at a sluggish quarterly pace of just over 0.1%.
“The slowdown partly reflects uncertainty around the business environment ahead of the general election, with many firms seeing a pause in decision-making until various policies are clear.”
The composite PMI manufacturing index fell from 53.0 in May to 51.7 in June. A value above 50 means the economy is expanding rather than contracting.
Rob Wood, chief UK economist at Pantheon Macro, said the drop in PMI was an election-related blip. “Retail sales rebounded strongly after April’s rain-soaked disaster and will continue to push forward as real consumer wage growth drives higher spending.
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“Persistent rainfall continued in May, but rainfall was ‘only’ 20% above average, compared to 68% in April. May was also the warmest since 1884.
Andrew Wishart, chief UK economist at Capital Economics, said the fact online sales rose 5.9% month-on-month suggested there was more to May’s rise than just better weather luring shoppers back to the high street.
“Overall, retail sales data for May showed preliminary signs that the strengthening of real income growth, now that inflation is back on target, is being translated into stronger spending,” Wishart said.
Separate ONS figures highlighted the size of the fiscal challenge facing the next government, with the gap between public spending and tax revenue hitting £15bn last month – £800m more than a year earlier and the third highest for May since modern records began in 1993 .
Spending last month was £2.3bn higher than in May 2023, while a £1.5bn rise in tax receipts was partly offset by weaker National Insurance contributions following cuts in the Autumn Statement and Budget.
May’s borrowing of £15 billion was slightly below the £15.7 billion forecast by the Office for Budget Responsibility, the government’s spending watchdog. The April loan was revised down by £2.1bn to £18.4bn.