U.K. retail sales declined sharply in May, reversing the significant gains recorded in April, with food store sales particularly dropping on a monthly basis.
Retail sales fell by 2.7% in May compared to the previous month, following a revised 1.3% increase in April, according to data released by the Office of National Statistics on Friday. Economists had predicted a more modest monthly decline of 0.5%.
On an annual basis, retail sales dropped by 1.3% in May, after an impressive 5.0% rise in April, when sunny weather encouraged British consumers to return to high streets, especially in food stores.
Similarly, U.S. retail sales also fell sharply in May, declining by 0.9%, marking the largest drop since January, following a downwardly revised 0.1% dip in April. This second consecutive monthly decline reversed much of the tariff-driven surge in March.
President Donald Trump’s aggressive and frequently changing tariff policies have increased economic uncertainty, making business planning difficult.
U.K. consumer sentiment improved in June to its highest level since December, though it remains firmly in negative territory, according to a survey by the British Retail Consortium released on Thursday.
“Gen Z saw the biggest improvement, in both economic outlook and their expectations of their future finances, with younger generations remaining the most optimistic about the future,” said BRC Chief Executive Helen Dickinson.
“This rising optimism may also reflect the increase in minimum wage from April, with many younger people expected to have seen a significant uplift in their pay packet. Expectations of future spending – both in retail and more generally – rose slightly, with more spending on groceries planned over the coming months.”
The Bank of England kept its benchmark Bank Rate steady at 4.5% at its recent meeting but highlighted risks stemming from a weakening labor market and higher energy prices due to escalating conflict in the Middle East.
“Interest rates remain on a gradual downward path,” said Governor Andrew Bailey in a statement. However, policymakers noted in the meeting minutes that interest rates are not on a preset path.
“The world is highly unpredictable. In the U.K. we are seeing signs of softening in the labour market. We will be looking carefully at the extent to which those signs feed through to consumer price inflation,” Bailey added.
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