Retail sales experienced their most significant growth in a year and a half this May, indicating a resurgence in consumer activity on the high street amidst improving economic conditions and better weather.

The Confederation of British Industry (CBI) reported that the weighted balance of retail sales rose to 8 per cent in the year to May, a sharp increase from minus 44 per cent in April, marking the strongest performance since December 2022.

This robust retail performance complements other data suggesting the UK economy has continued its growth trajectory after emerging from recession earlier this year. Prime Minister Rishi Sunak has emphasised economic recovery as a central theme of the Conservative Party’s general election campaign.

The latest purchasing managers’ index, a key indicator of economic activity, suggests GDP could grow by 0.3 per cent in the second quarter of the year. Additionally, inflation fell to 2.3 per cent in April from 3.2 per cent, significantly down from a 42-year peak of 11.1 per cent.

The CBI noted that retail sector inflation has slowed to its lowest rate since August 2020, with prices expected to increase only slightly faster next month. This trend indicates that headline CPI inflation could decline further in May.

GfK’s consumer confidence index, a long-standing measure of public sentiment, has reached its highest level in over two years.

Alpesh Paleja, the CBI’s lead economist, stated: “May’s increase in retail sales adds to the swathe of data pointing to an improvement in activity over the near-term. Falling inflation and continuing real wage growth will contribute to a healthier consumer outlook, in turn supporting the retail sector further.”

The retail boost in May is partly attributed to calmer weather following April’s heavy rainfall. However, the Office for National Statistics recently reported a 2.3 per cent contraction in April sales, the steepest drop this year, which Ruth Gregory, deputy chief UK economist at Capital Economics, suggested was an anomaly.

Despite the positive sales figures, the CBI forecasted a slight contraction in sales for the upcoming month. Employment in the retail sector also fell sharply in May and is expected to decline further.

Paleja cautioned: “Retailers are restrained about their business situation over the coming quarter. Headline sales are expected to fall moderately next month, and it’s concerning that retailers’ investment intentions have deteriorated noticeably.”

Economists remain hopeful that retail sales will improve as living standards recover, with wages outpacing inflation for nearly a year. However, the current parliament is set to be the first on record where average household living standards have declined. GDP per capita has been sluggish over the past two years, and household finances are still rebounding from the cost-of-living crisis.

Paleja concluded: “All parties should use this general election campaign to embrace policies that will embed sustainable growth, foster the investment we need to develop a labour market that delivers higher living standards, and accelerate our transition to net zero.”

Labour holds a 20-point lead over the Conservatives in the polls, with the general election scheduled for 4th July.

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Retail Revival: High Street Sales Surge in May