UK Retail Sales Were Soaring Before US Tariffs Rocked Confidence
Britain’s economy posted its strongest retail sales since 2021 in the first quarter, before consumer confidence was sent sliding by Donald Trump’s tariffs.
Record-breaking sunshine in March helped UK retail sales climb for a third straight month, the Office for National Statistics said Friday, with volumes rising 0.4%. It beat expectations for a 0.4% drop, and meant sales over the first quarter were up 1.6%.
The figures showed the UK economy picking up momentum and deep caution among households finally lifting after tepid growth since the Labour party returned to government last summer.
However, the long-awaited revival in consumer spending may be short-lived after trade tensions and a series of annual price increases, from council tax to energy bills, knocked household confidence in April. GfK said on Friday that its consumer confidence index dropped four points to minus 23 in April, the weakest under the Labour government.
A separate survey by the British Retail Consortium earlier in the week was even more bleak. The BRC’s index for the state of the economy over the next three months dropped significantly to minus 48 in April, down from minus 35 in March.
“March’s rise was largely due to unusually sunny weather and the drop in consumer confidence in April after the US tariff chaos suggests that households may start to spend more cautiously in the coming months,” said Alex Kerr, UK economist at Capital Economics.
The ONS said clothing sales were boosted by the sunniest March in England on record and the third-sunniest for the UK as a whole, according to the Met Office. Non-food sales climbed 1.7%, more than offsetting a 1.3% fall in sales of groceries.
It marks the best run for overall sales growth since early 2021 when the economy was shaking off the effects of a Covid lockdown. The retail sales will add almost 0.1% to gross domestic product in the first three months of the year.
Money markets maintained wagers for a quarter-point interest-rate cut at the Bank of England’s next meeting in May but slightly trimmed expectations beyond.
However, policymakers will be hesitant to cheer signs that the extreme caution that has held back household consumption in recent years has finally lifted.
While bumper real wage growth and lower mortgage costs are helping to bolster household finances, confidence took another setback in GfK’s sentiment survey.
The drop pushed confidence down to the weakest in 17 months and worse than the fall to minus 21 expected by economists. GfK said the deterioration was driven by fading confidence in the economic backdrop.
“Consumers have not only been grappling with multiple April cost increases in the form of utilities, council tax, stamp duty, and road tax, but they are also hearing dire warnings of renewed high inflation on the back of the Trump tariffs,” said Neil Bellamy, consumer insights director at GfK.
Source : Bloomberg
