"Here's a lingering squeeze on household pay from inflation. So this pickup is unlikely to be sustained "
-Samuel Tombs, an economist at Capital Economics Ltd.
Sales at British retailers unexpectedly fell last month, led by a sharp drop in food sales, indicating continued weakness in consumer spending despite the overall economic improvement. Sales including fuel tumbled 1.3% from March, when they fell 0.6%, data below analysts' expectations of a flat reading, the Office for National Statistics said Wednesday. The report also showed that total food sales plunged 4.1% in the same month, recording their largest monthly fall in almost two years. Earlier this month the BoE has forecast a gradual recovery in consumer spending, however weak wage growth is expected to limit any pickup in expenditure.
"We've seen retail sales pick up at the start of the year and that helped the overall economy to grow," Samuel Tombs, an economist at Capital Economics Ltd. in London, said before the data.
Also Wednesday data showed that the nation's budget deficit widened in April, adding more pressure on the Chancellor of the Exchequer George Osborne as the IMF is preparing to deliver its verdict on the U.K. economy. The shortfall excluding temporary support for banks stood at 10.2 billion pounds, compared with 8.9 billion pounds in the previous year. The U.K. economy avoided falling into a triple-dip recession, but still there are risks to the recovery, including the tensions in the neighbouring Eurozone.
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