UK retail sales Preview: UK retailers under pressure even with real wages turning positive

• The UK retail sales are expected to fall on a monthly basis in April as negative inflation-adjusted wages and timing of Bank and Easter holidays weigh.
• Core retail sales stripping the motor fuel sales are expected to rise over the month and to accelerate over the year.

Total retail sales are expected to rise 0.7% over the month in April after falling -1.2% m/m due to a large fall of 7.4% from petrol sale in March. When the UK retail sales are stripped of motor fuel sales the core retail sales are expected to rise 0.4% over the month in April after falling -0.5% m/m in March, the Office for National Statistics is expected to report on Thursday, May 23 at 8:30 GMT.

When compared to April last year, total retail sales are expected to rise 1.4% y/y while after auto motor sales are excluded, the sales are seen rising 1.3% y/y in April.

The UK retail sales reported very choppy results during the first quarter of this year, the market consensus by a relatively large margin. While retail sales in January missed the expectation rising 0.1% m/m compared to the expected increase of 0.5% m/m in January, February figure doubled the expectations rising 0.8% m/m while March figure came in at -1.2% m/m compared to -0.5% monthly fall expected.

Based on the early estimates from British Retail Consortium (BRC) in cooperation with KPMG, total retail sales fell -3.1% y/y in April with food sales rising 3.0%y/y in  April while non-food items are expected to decrease by -1.6% y/y on three months average basis.

The timing of Bank and Easter holidays are to blame for the weakening sales. “A drop in sales this April, compared to last, was almost inevitable given the earlier timing of Easter. With much of the spending in preparation for the Bank Holiday weekend falling in March this year, a record low in sales growth, in contrast to last year’s record high, does not come as a surprise. However, even once we take account of these seasonal distortions, the underlying trend in sales growth is heading downwards,” Helen Dickinson OBE, Chief Executive at BRC said in the release.

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From the broader point of view, the volatile performance of the UK retail sales are decelerating because of Brexit-related trends including higher inflation and negative real, inflation-adjusted wages. With inflation decelerating recently, the inflation-adjusted wages turned positive again, but it is too early for consumers to feel the heat of wages rising above inflation to see it directly spotted in the volume of retail sales, especially in non-food items.