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Retail sales rose in April by 1.2%, growing for a fourth straight month. Despite global and domestic economic uncertainty, consumer activity is proving resilient, driven by wage growth that is consistently above inflation.
The effects of February’s interest rate cut will have helped, reducing homeowner’s mortgage costs and providing cheaper borrowing rates, ultimately putting more money in the consumer’s pocket for them to spend.
A dry April helped to encourage people onto the high street, along with the increased seasonal spending that comes with an Easter Weekend and its accompanying bank holidays.
Rajeev Shaunak, head of consumer at MHA said, The increase in retail sales will be welcomed by the sector, particularly given the predictions around a potential decline following the Budget.
However, this upward trend should be treated with caution as it is possibly a temporary boost given the early good weather rather than a permanent increase. While stock levels are generally better, there was a significant amount of discounting in the run up to Christmas, so although sales held to an extent, this was at the expense of profit margins.
There is now also increasing evidence that average consumer spending is now settling down after the post Covid bounce back and consumers are cautious about spending on extras. If the housing market, especially in London continues to slow, this may also have an impact on consumer confidence going forward. Currently, it is hard to predict but a cut in interest rates may help to maintain the current level of consumer spending.
However, following the cost-of-living crisis and a period of economic volatility, is it possible that we are seeing a behavioural shift that is creating a generation of savers and investors?
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