UK retail sales volumes rose 2.9 percent on the month in May, rebounding sharply after slumping a revised 1.8 percent in April and recording close to zero growth in the previous two months. Volumes rose 1.3 percent on the year in May after a revised decline of 2.3 percent in April. Officials noted that year-over-year comparisons for May were impacted by an additional public holiday in May 2023 to mark the coronation of King Charles III.

Stronger headline sales volumes in May were largely driven by improved sales for clothing retailers and furniture stores. Non-store retailing also recorded strong growth on the month. Excluding fuel, sales rose 2.9 percent on the month after a revised previous fall of 1.4 percent and advanced 1.2 percent on the year after a revised previous decline of 2.5 percent.

The sharp drop in volumes that was recorded in April was partly caused by unusually wet weather, a point noted by officials at the Bank of England earlier in the week when a majority of members of the Monetary Policy Committee voted to leave policy rates on hold. Officials also noted an improvement in consumer confidence and evidence of a recent pick-up in consumer demand at their meeting, consistent with today's data.

Today's data were considerably stronger than the consensus forecast for a month-over-month increase of 1.6 percent and a year-over-year decline of 1.3 percent in sales volumes in May. The UK RPI and RPI-P rose from minus 23 to minus 8 and plus 2 respectively, indicating that UK data are now coming in close to consensus expectations.

Sales were much weaker than expected in April, falling 2.3 percent on the month and 2.7 percent on the year. Forecasters see a rebound for May, calling for a monthly 1.6 percent rise that would trim annual contraction to 1.3 percent.

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.