-May Retail Sales +1.4% m/m; +2.4% y/y; median +1.1% m/m; +2.4% y/y
-May Retail Sales ex fuel 0.9% m/m; 3% y/y; median +1.0% m/m; +2.4% y/y

LONDON (MNI) – Retail sales bounced back strongly in May following
the April washout, leaving underlying sales performing reasonably
strongly, figures released by National Statistics Thursday.

In spite of the economic gloom stories, retail volumes continue to
grow at a moderate pace on a trend basis. While headline sales in Q2
look likely to fall, sales excluding fuel could turn out positive over
the quarter.

The data won’t alter the short-term outlook for monetary policy
with most economists now suggesting the Bank of England will add another
Stg50 billion in Quantitative Easing at the July Monetary Policy
Committee meeting.

Total retail sales rose 1.4% on the month in May and were up 2.4%
on the year. This was above the median for a 1.1% monthly gain but in
line with the median for the yearly increase.

The sharp rise should be seen in the context of a large weather
related fall in April, where volumes were down a revised 2.4% on the
month.

Excluding automative fuel, sales rose 0.9% on the month and were up
3% on the year, a little below the median of 1% on the month but above
the median for a 2.4% annual rise.

Sales at clothing and footwear stores rose 3.4% on the month in
May, following a 5.5% monthly drop in April. There was also a positive
addition from department store sales which were up 0.8% on the month,
household goods which rose 0.7% and other stores where volumes rose
0.2%.

Overall, non-food sales volumes were up 1.3% between April and May,
while sales at predominantly food stores rose just 0.2%.

On a trend basis, headline sales were up a lacklustre 0.5% in the
three months to May compared with the previous three months. Excluding
auto-fuel, however, volumes were up a decent 0.9%. Looking ahead to Q2,
headline sales would fall on the quarter even if volumes rose strongly
in June. Ex-fuel, though would see a 0.4% quarterly gain even if volumes
were flat during the month.

While retail volume growth remains reasonable, stores are still
having to discount heavily to sell stock. The overall retail sales
deflator fell to 0.9% on the year in May, the lowest since October 2009.
Ex-fuel the deflator was the lowest since February 2010.

The period for this survey was April 29 to May 26 and therefore did
not cover the Jubilee celebrations. National Statistics said there was
no evidence of any Jubilee effect, which will instead show up in the
June data.

-London bureau: +44 20 7862 7491; email: puglow@marketnews.com

[TOPICS: MT$$$$,M$B$$$,MABDS$]