Retail sales surprisingly continued to recover in May. A 0.3 percent monthly increase following April's unrevised 0.5 percent gain was rather unexpected by market consensus calling for a decline of 0.2 percent. This is the third monthly advance in the last four months and large enough to boost annual growth from a revised minus 3..4 percent to minus 2.1 percent, the least negative reading since March 2022.

Excluding auto fuel, sales volumes rose 0.1 percent versus April and declined 1.7 percent on the year.

May's overall monthly gain, however, masked a decline in food store sales volumes of 0.5 percent as well as a 0.2 percent drop at non-food stores excluding auto fuel. Within the latter, sales volumes rose at non-specialised stores (0.6 percent) and household goods stores (1.5 percent), but declined at textile clothing and footwear stores (minus 0.4 percent) and in the other stores category (minus 1.4 percent).

Notable monthly increases in sales volumes were instead registered in non-store retailing (2.7 percent), which were boosted by online sales of outdoor-related goods and summer clothing, and auto fuel stores (1.7 percent), which fully recovered their April decline in part due to falling fuel prices.

The data of this report lift the UK's ECDI to 26 and the ECDI-P to 16, signalling a moderate degree of overall economic outperformance versus market expectations.

Retail sales in May are expected to fall 0.2 percent on the month following a broad-based but still limited 0.5 percent rebound in April.

Retail sales measure the total receipts at stores that sell durable and nondurable goods. The data include all internet business whose primary function is retailing and also cover internet sales by other British retailers, such as online sales by supermarkets, department stores and catalogue companies. Headline UK retail sales are reported in volume, not cash, terms but are available in both forms. The data are derived from a monthly survey of 5,000 businesses in Great Britain. The sample represents the whole retail sector and includes the 900 largest retailers and a representative panel of smaller businesses, including internet sales. Collectively, all of these businesses cover approximately 90 percent of the retail industry in terms of turnover.

With consumer spending a large part of the economy, market players continually monitor spending patterns. The monthly retail sales report contains sales data in both pounds sterling and volume. UK retail sales data exclude auto sales.

The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

Retail sales not only give you a sense of the big picture, but also the trends among different types of retailers. Perhaps apparel sales are showing exceptional weakness but electronics sales are soaring. These trends from the retail sales data can help you spot specific investment opportunities, without having to wait for a company's quarterly or annual report.