June 14, 2018 / 12:02 PM / 3 months ago

UPDATE 2-Britons go on spending spree to mark royal wedding, sunshine

    * Retail sales +1.3 pct m/m vs poll forecast +0.5 pct
    * Yearly volumes increase biggest since April 2017
    * Supermarkets say royal wedding boosted sales
    * Sterling rises, gilts fall after data

 (Adds details on online shopping)
    By William Schomberg and Alistair Smout
    LONDON, June 14 (Reuters) - British retail sales jumped for
a second month in a row in May as a royal wedding and warm
weather helped shoppers put a winter slump further behind them,
according to data that showed much stronger spending than
expected.
    Thursday's figures pushed up the value of sterling as
investors took them as a sign that the economy was recovering
from a sharp slowdown in the wintry start to 2018 which put the
Bank of England off an interest rate hike.
    The data also showed strong growth in online spending, which
has forced many traditional retail firms to close stores.
    Overall sales volumes rose by more than all forecasts by
economists in a Reuters poll, jumping by 1.3 percent in monthly
terms and following an upwardly revised 1.8 percent bounce-back
in April, the Office for National Statistics said.
    Supermarkets and other retailers said shoppers spent more on
food and household goods before the wedding of Prince Harry and
Meghan Markle in the middle of the month, the ONS said.
    Brian Hilliard, an economist with Societe Generale, said the
data should be weighed against weaker figures for manufacturing
and construction output in April published earlier this week.
    "There is still some tension in trying to reach the
second-quarter growth of 0.4 percent that the Bank of England
predicts," he said.
    In the three months to May, sales rose by 0.9 percent
compared with a 0.2 increase in the three months to April, a
period which included heavy snowstorms and unusually cold
temperatures, the ONS said.
    Compared with a year earlier, sales volumes were up 3.9
percent, the biggest rise in more than a year and again above
all forecasts in the Reuters poll.
    Last week, figures from British Retail Consortium and
Barclaycard suggested sales in May rose sharply.                
    The BoE expects consumers to feel the benefit of a fall in
inflation and rising wages after suffering a squeeze on their
spending power last year when the impact of the 2016 Brexit vote
pushed up prices sharply.
    However, it held off from raising rates at its May meeting
as it waited to be sure that Britain's economy was recovering
from its early 2018 slowdown.
    Data published earlier this week suggested that the recovery
has been slow - factories had their worst month in
five-and-a-half years in April and the pace of growth in wages
slowed.                          
    The still weak finances of many households, combined with
the rise of online shopping, has hammered many retailers.
    Chains such as Marks & Spencer         and House of Fraser
have been forced to shut stores as consumers shop online for
cheaper goods and other retailers have gone out of business.
    In the latest sign of tough conditions facing retailers,
British clothing chain N Brown Group Plc          said on
Thursday it was looking to close all 20 of its stores and to
move entirely online.             
    The ONS said the amount of money spent on online shopping
jumped by nearly 20 percent in May compared with the same month
a year earlier, accounting for 18 percent of all retailing,
excluding fuel, almost double its share of six years ago.

 (Writing by William Schomberg; Editing by Janet Lawrence)
  
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