Sales in British shops have bounced back in May, according to retail data that suggests slowing inflation is encouraging customers to buy more.
A net balance of +8% of retailers told a Confederation of British Industry (CBI) survey that sales volumes were up this month compared with the same period a year earlier – a sharp improvement on the -44% year-on-year figure for April. The balance is the difference between companies who answered that the number of items was “up” or “down”.
May marked the most positive monthly reading for the CBI distributive trades survey since December 2022.
Alpesh Paleja, the CBI lead economist, said there were signs of a recovery in retail in the short term. “Falling inflation, and continuing real wage growth will contribute to a healthier consumer outlook, in turn supporting the retail sector further,” he said.
The figures are likely to be seized on by Rishi Sunak and the Conservatives, with much of the prime minister’s justification for calling a summer election based around his claim that “the economy is turning a corner”.
May’s better data follows poor sales values in April and March that were blamed on bad weather and the ongoing cost of living crisis.
The amount of goods bought in April also dropped 2.3% month on month, according to Office for National Statistics data, with furniture, clothing, sports equipment, and games and toys among the big ticket items customers elected to do without. The fall was partly blamed on Easter falling earlier than usual, at the end of March.
Shop prices are also growing more slowly, according to the CBI’s measure of selling price inflation. Inflation was at its slowest since August 2020 and below its long-run average, with the expectation of only a slight pickup in June.
This matched earlier data from the British Retail Consortium showing that store prices grew at an annual rate of 0.6% in May, down from 0.8% the previous month. This was a huge drop from the high of 9% reached in May 2023 and the slowest price growth since November 2021.
The data will be welcomed by the Bank of England as further proof that the economy is cooling as it considers a cut to interest rates in June.
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However, the long-term picture was less positive. The CBI polled 137 businesses involved in retail, of which 56 were chains, and found that jobs in the sector were shrinking, with employment declining for the seventh consecutive quarter. The number of people employed in retail is also expected to decline, though more slowly, next month.
Retailers said they were less likely to invest now than they were in February, demonstrating pessimism about the future state of the economy. “The mixed mood from our survey demonstrates just how nascent the economic recovery is,” Paleja said.