What’s Going On Here?Data out on Friday showed UK retail sales unexpectedly jumped in April, then stumbled around a bit, then started a fistfight with a pigeon. What Does This Mean?After two consecutive months of declines, the number of goods sold in UK stores and online climbed 1.4% in April from the month before. That might not sound like much, but it blitzed the 0.2% drop economists were expecting at a time when inflation is at a 40-year high. Then again, the bulk of the gain was driven by an uptick in supermarket alcohol and tobacco sales. That not only suggests that the cost-of-living crisis is forcing Brits to entertain themselves at home, but that they’re plying themselves with liquor and cigarettes to sand the edges off this otherwise miserable existence. We know we are. Hic. Why Should I Care?Zooming in: Get used to this.
Economists haven’t been fooled by April’s retail rebound, arguing that things are only going to get worse – maybe even recession-worse – as Brits are forced to tighten their belts over the next few months. For one thing, the UK government has recently made the unsympathetic move of increasing both taxes and the limit on how much energy giants can charge customers. And for another, shoppers are forking out extra for just about everything: they spent 13% more than in a pandemic-free February 2020 last month, even though they only bought around 4% as many products.
The bigger picture: Recession warning.
Disposable incomes in Britain have now fallen almost as fast as they ever have done, which might be why data out last Friday showed UK consumer confidence fell to its lowest level in nearly 50 years this month (tweet this). It’s now sitting below an ominous level that’s generally preceded a big dropoff in household spending, which itself has gone on to lead to a recession. | 