High street retail sales rose 0.5% across the UK in April, despite reports of difficult trading conditions, according to statistics released today.
April's 0.5% monthly gain was driven by increases in all sectors but non-specialised stores and registered above the consensus for no change, the Office for National Statistics (ONS) reported.
The unexpected rise beat forecasts of an unchanged figure, however the March 0.1% decline was revised to a 0.3% drop in retail sales.
Nevertheless, blessings were mixed for retailers, as year-on-year growth in retail sales shrunk to its weakest point in two years, as the annual rise slipped to 2.3% from 2.4% in March.
The data also showed that the seasonally adjusted volume of retail sales at constant prices in the three months to April 2005 was 0.2% higher than in the previous three months. This figure remained unchanged from the March 2005 results.
Overall, the underlying rate of retail sales remains much lower than the three months to April 2004, in which retail sales growth was 1.5%.
"Today's news shows although there is no freefall in UK retail sales, the domestic demand is going to be weak through 2005," said Andrij Halushka, economist with the Centre for Economics and Business Research (CEBR).
"Combined with the latest labour market data and the minutes of the May MPC meeting, this news further lowers interest rate expectations," he added.
Minutes of the May Monetary Policy Committee meeting of the Bank of England revealed an 8-1 vote to keep rates unchanged.
Meanwhile, index results from the Institute of Chartered Accountant (ICA) showed plummeting confidence in the retail and wholesale sector. Confidence fell from an already tepid score of +0.4 in the previous survey to a score of -14.1 in the survey released today.
Analysts blamed fragile consumer spending and high levels of household debt for the fall.
"The index suggests that the worst may not be over for retail and finance, as weakening economic activity in other sectors may also constrain consumer spending over the coming months," said Eric Anstee, chief executive of the ICA.
Anstee said that with inflation seeming to stabilise, the Bank of England should cut interest rates sooner rather than later to mitigate the slowdown in the retail market.
