LIVE MARKETS-UK gloomy retail sales: more than meets the eye?

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UK'S GLOOMY RETAIL SALES: MORE THAN MEETS THE EYE?

The UK was dealt another blow on Friday after May retail sales clocked their biggest monthly drop since 2023, but there's more than meets the eye to the numbers.

Retail sales volumes slid 2.7%, but Investec economists say the data likely exaggerates the real degree of weakness.

"...part of this fall is due to payback from previous months when sales volumes were elevated by temporary factors," they say

Sunny spring weather had boosted food sales, which then contracted in May, while the impending expiration of stamp duty relief had urged consumers to front-load house purchases, says Investec, adding scant reaction in financial markets hints at recognition of these "special factors".

AJ Bell investment analyst Dan Coatsworth flags that many stocks in the sector rose on the news, something he puts down to markets being forward-looking.

But for him the big unknown is whether May's data is a blip, or a sign of things to come. June's good weather is a double edged sword.

"Blue skies should have enticed consumers out of the house and onto the high street, but it could also mean they’ve spent less time indoors when they might have been browsing and purchasing goods online," Coatsworth says.

Over at RSM UK, chief economist Thomas Pugh strikes a gloomier tone, flagging sticky inflation and a cooling labour market as further darkening the outlook.

Meanwhile, RSM UK's head of retail Jacqui Baker gave a nod to recent cyber incidents in the retail sector as potentially being behind a hit to online sales.

"Despite this shift in behaviour, it didn’t translate into a much-needed boost to high street footfall," she said.

(Lucy Raitano)

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