UK retail sales drop 2.7% in May, biggest fall since 2023
&imwidth=800&imheight=600&format=webp&quality=medium "UK retail sales drop 2.7% in May, biggest fall since 2023")
People shop on Oxford Street in London, Britain April 10, 2023. Photograph: (Reuters)
UK retail sales fell 2.7% in May, the steepest decline since December 2023, raising concerns over economic health.
Britain’s consumer engine has hit the brakes.
UK retail sales plummeted by 2.7 per cent in May, marking the sharpest drop since December 2023 and raising fresh concerns about the health of the British economy.
According to figures released by the Office for National Statistics (ONS) on Friday, the volume of goods sold both online and in physical stores fell far more than the 0.5 per cent decline forecast by economists, as reported by Reuters. This marks the first monthly fall in 2025 after four consecutive months of growth.
The data paints a worrying picture for the UK’s second-quarter growth, especially after a strong rebound earlier this year.
Retail rebound stalls despite strong Q1
Retail sales had surged in the first quarter , the strongest since 2021, buoyed by mild weather and improving real wages. But those gains now appear short-lived.
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According to the ONS, food sales dropped by 5 per cent, while household goods stores saw a 2.5 per cent decline and clothing and footwear sales fell 1.8 per cent. The decline was broad-based, cutting across all major retail categories.
The sharp contraction in May suggests that British consumers are starting to feel the pinch, likely from lingering inflationary pressures and rising mortgage costs.
Broader economic risks loom
The disappointing retail figures add to fears that the UK economy could be losing momentum in the second quarter. Gross domestic product (GDP) had grown by 0.7 per cent in Q1 2025, according to ONS data, but signs of weakness began appearing in April when the economy contracted on a monthly basis.
Forecasters now expect a sharp deceleration in growth for the current quarter, raising doubts about the durability of the UK’s post-recession recovery.
Market reaction and interest rate outlook
The British pound, which had earlier gained in anticipation of resilient data, pared those gains and was last trading 0.1 per cent higher at $1.3484, as quoted by Reuters.
Markets are now betting more strongly on a rate cut from the Bank of England. As of Thursday, traders had priced in 48 basis points of rate cuts by year-end, signalling expectations of a dovish pivot as consumer demand shows signs of fatigue.
(With inputs from the agencies)