Contrary to expectations consumer spending in the UK remained undaunted by a round of interest rate hikes as sales rose past expectations.
Retail sales in the UK exceeded all expectations in May 2007, as per official data on Thursday, June 14, 2007. This is further evidence of consumer demand remaining unaffected by higher interest rates, as published by Reuters.
Data from the Office for National Statistics (ONS) revealed a 0.4% rise in sales in May 2007, picking up from 0.1% decline in April and just about surpassing predictions with a 0.3% rise. For year-on-year sales the increase subsided from 4.2% in April to 3.9% but remained ahead of expectations of a 3.8% gain.
Based on the figures, four hikes in borrowing costs since August 2006 haven’t significantly dented the spending by consumers; fuelling speculation of a minimum of one more hike in interest rates this year. Consumer spending trend on the strength of a still solid housing market is clearly formidable. The easing of house price inflation came on the heels of sellers storming the market to a degree never seen before, which eventually proved to be a futile attempt to meet the deadline for providing a home information pack.
Despite uninterrupted growth in sales, May proved to be a fairly tough month for the country’s retailers due to several reasons. Signs were evident of high commodity prices fuelling a steady increase in goods price inflation in addition to the pressure that consumers began to feel from the recent spate of interest rate hikes.
Last month’s hostile weather didn’t help in luring shoppers to Britain’s high streets which was a blow mainly to clothing retailers. News carried by Retail Bulletin quoted Paul Clarke, National Director, Retail and Wholesale sectors as saying, "Though the underlying figures remain generally robust, fashion retailers will be praying for sun to help boost the sales of their summer collection."
As per the views of a research analyst at RNCOS, the trend of rising interest rates and tightening household bills notwithstanding, UK retailers had plenty of reasons to cheer on account of the prospering housing market, fastest expansion of the labor force in 20 years due to immigration and a powerful finance and business services sector.
