Key insights
- UK retail sales beat expectations in March, driven by fuel stockpiling and improved weather. However, consumer confidence plummeted to a two-year low, signaling a potential slowdown in April. Capital Economics forecasts further declines in consumer confidence and retail sales growth, with CPI inflation and unemployment expected to peak later in the year. This news has a slightly negative influence on US equities as it points to global economic uncertainty.
Investing.com -- UK retail sales increased 0.7% in March compared to the previous month, surpassing expectations of a 0.1% rise, according to official data released Friday.
On an annual basis, retail sales grew 1.7% year-on-year, exceeding the forecast of 1.3%.
Retail sales excluding fuel posted a monthly increase of 0.2% in March, slightly above the expected flat reading. On a yearly basis, sales excluding fuel rose 1.7%, falling short of the 2.0% forecast.
The March increase followed a revised 0.6% monthly decline in February and was primarily driven by a 6.1% monthly jump in fuel sales as motorists stockpiled amid rising fuel prices. Sales also increased at clothing stores (1.2%), department stores (1.1%), and household goods retailers (0.6%), with drier-than-usual weather boosting foot traffic.
Online store sales volumes rose 1.4% to their highest level since February 2022, supported by spring sales.
Consumer confidence fell from -21 in March to -25 in April, marking its lowest point in over two years. This decline suggests retail sales volumes could drop approximately 2.0% month-on-month in April, with annual growth potentially falling from 1.7% in March to around 0.0%.
Capital Economics forecasts CPI inflation and unemployment will peak at 4.0% and 5.5% respectively later this year. The firm expects consumer confidence could decline further to -30, potentially pushing annual sales volume growth to -1.5% by year-end, consistent with their forecast for real consumer spending growth of just 0.1% in 2026.