Rebound in UK retail sales signals solid second quarter

Thu Jun 20, 2013 6:42am EDT
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By Olesya Dmitracova and David Milliken

LONDON (Reuters) - British retail sales bounced back much more than expected in May, adding to evidence of accelerating economic growth in the second quarter and easing some of the pressure on the central bank to boost the economy.

The Office for National Statistics said on Thursday sales volumes grew 2.1 percent on the month, after posting the sharpest fall in a year in April. May's rise was the biggest since February. Compared with a year earlier, sales rose 1.9 percent, again the fastest increase since February.

The pound pared losses against the dollar while British government bonds fell further, as the release backed views the Bank of England is unlikely to ease monetary policy soon.

However, some economists questioned whether the latest figures pointed to a broad-based return to health and said they still left open the possibility that incoming BoE governor Mark Carney will push for another cash injection for the economy after he takes over from Mervyn King next month.

"I wouldn't view these data as being inconsistent with calls for more stimulus in the UK," said David Tinsley, economist at BNP Paribas.

"There is a genuine debate to be had as to whether the second-quarter figures are part of a sustained recovery or just in some respects an erratically strong quarter," he added.

Retail sales were mainly lifted by discounting at supermarkets and online shopping, the ONS said. Food sales grew by 3.5 percent from April, the strongest rise in two years, while non-store retailing grew by 4.3 percent.

The overall sales figures were also flattered by a poor showing in April, when unseasonably cool weather dented demand.   Continued...

Customers look at a food display in the food hall at a Marks & Spencer shop in central London May 21, 2013. REUTERS/Suzanne Plunkett