51乱伦

Key Messages

鈥�    May saw an inevitable slowdown in retail sales

鈥�    YoY retail sales values -0.1%, volumes -1.3%

鈥�    Only 15th month since 1988 of monthly value decline

鈥�    MoM volume decline -2.7% vs economist consensus -0.5%

鈥�    MoM figures always going to look bad post-Easter boost

鈥�    Implied inflation of 1.2% lower than headline CPI (3.4%)

鈥�    Bad month for grocery sales (vals -0.4%, vols -3.4%)

鈥�    Non-food sales growth anaemic (vals +1.0%, vols +1.0%)

鈥�    Carpets, electricals, off-licences, jewellery standout categories

鈥�    Challenging month for textiles, chemists, footwear/clothing

鈥�    Online sales decline -1.0% MoM and -2.5 YoY

鈥�    Online penetration somehow increases by +40bps to 27.2%

鈥�    Far too premature to call a consumer slowdown.

Blip or beginning of the end? Economists think the latter, I firmly believe the former. Today鈥檚 retail sales figures were always going to appear bad and there was inevitably going to be an over-reaction. But hardly anyone was expecting them to be this bad. Even so, to jump to conclusions on the basis of one month鈥檚 underperformance seems ridiculously premature.

The headline stats

鈥淚t would be wholly unreasonable to expect a pattern of accelerating monthly growth indefinitely. Indeed, May鈥檚 figures are highly unlikely to hit the highs of this month, so when they are released, they will almost inevitably show a month-on-month decline. Expect a predictable chorus of 鈥渟ee 鈥� we told you it wouldn鈥檛 last鈥� from the economist community.鈥�

Prophetic words from last month鈥檚 Retail Note (in truth, not the hardest predictions I鈥檝e ever had to make). For what they are worth (very little, if anything) the 鈥榟eadlines鈥� from the ONS were thus: 鈥淩etail sales volumes (quantity bought) are estimated to have fallen by -2.7% in May 2025, following a rise of +1.3% in April 2025 (revised up from a rise of 1.2% in our last bulletin). Food store sales volumes fell back in May. This followed a strong rise in April which retailers attributed to the good weather. Despite this fall on the month, sales volumes rose by +0.8% in the three months to May 2025 when compared with the three months to February 2025.鈥�

In economist parlance, retail sales fell significantly last month, more than wiping out gains from previous months. Apparently, a sure sign that economic growth generally has evaporated, with indications that rising inflation impacted on consumer behaviour. 鈥淩etail spending dries up鈥� ran the headline on Capital Economics鈥� Rapid Response. Overall retail spend of £39.6bn in May (vs £39.9bn in April) hardly constitutes 鈥渄rying up鈥�.

Above all else, this totally feeds my usual narrative / rant as to the folly of month-on-month comparisons in what is a highly seasonal market. On a month-on-month basis, retail sales were always going to be weak in May because April included Easter. Just as night follows day, any month post a seasonal spike in spend will appear weak. No matter how much the ONS may try to seasonally adjust the figures, night will still follow day.

So, prior to last month, YTD we had seen a highly positive trend of accelerating growth in both retail sales values and volumes, with inflation largely kept in check. This culminated in value and volume growth of +6.2% and +5.2% respectively in April. For there to be a month-on-month increase in May, growth would have needed to exceed these figures, which was never going to happen. On this basis, the economist consensus of -0.5% looked woefully undercooked, and so it has proved.

The month-on-month decline should come as absolutely no surprise 鈥� and actually carries limited relevance in any case.  

The more meaningful picture

In fact, the real surprises and disappointments came in the far more meaningful year-on-year figures. Y-o-Y retail sales values (exc fuel) actually declined by -0.1%. Monthly retail sales hardly ever go backwards 鈥� this has only happened 15 times in the ONS timeseries going back to 1988. And five of those months were during COVID.

Y-o-Y retail sales volumes (exc fuel) were down -1.3%. Volume declines are much more common, but this still represents the first month of negative growth since November 2024 and a significant set back on the positive trends we were seeing YTD (volumes Jan 鈥� Apr ca. +2.5%).

Inflation a contributory factor? Hard to argue definitively, either on a headline or disaggregated basis. Headline shop price inflation of 1.2% considerably below CPI of 3.4% flagged earlier in the week.

Performance by sector

The weak figures for May owed much to a sharp reverse in grocery spending. Foodstore spend was down Y-o-Y by -0.4%, while volumes were down a very disappointing -3.4%. Implied levels of inflation of 3.0% possibly depressing demand, but question marks around the veracity of the data, given the generally positive narrative from the foodstore operators themselves.

Anaemic growth in non-food (values +1.0%, volumes +1.0%, implied inflation of 0%), with the usual disparities between individual sub-sectors. Surprisingly, Carpets were again the best performing sub-sector (values +17.6%, volumes +17.3%), followed by Electricals (+13.4%, +15.4%), Jewellery (+6.4%, +2.8%) and Music & Video (+5.7%, +10.9%). 

At the other end of the performance spectrum, another very challenging month for Textiles (values -40%, volumes -39.1%), Chemists (-20.9%, -23.2%), PCs & Telecomms (-10.9%, -5.4%), Footwear (-7.0%, -5.4%), Cosmetics (-4.8%, -5.3%) and Garden Centres (-4.4%, -4.5%). After a strong rally the previous month, Clothing came back down to earth with a bump (-2.1%, -2.3%).

No salvation from online. Online values fell by -1.0% M-o-M and by -2.5% Y-o-Y. Overall retail sales fell -0.1% Y-o-Y, online sales declined at a far steeper -2.5%. Yet by some quirk of ONS mathematics / seasonal adjustment, online penetration rose from 26.8% in April 2025 to 27.2% in May 2025 (still -60ps lower than where it was this time last year).

Wider context

The usual refrain from me 鈥� it鈥檚 always dangerous to read too much into one month鈥檚 retail sales figures, be they strong or weak. Four extremely strong months followed by one bad do not make a discernible pattern.

There is definitely a tendency for certain analysts to cling to one month鈥檚 figures that support their wider predictions and expectations. For many, May did just that. Evidence of rising inflation and weak consumer demand. But this could just as easily turn the other way in June 鈥� indeed, with the month already nearing an end and the weather set fair, a rebound in retail sales (especially in food) is a more a likelihood than a possibility. We shall know in a month鈥檚 time.

A blip or a potent of things to come? My money is still on the former 鈥� but not without further blips along the way. Par for the retail course and all its seasonal glory.