The Retail Note - Retail sales: they’re coming home

Key Messages

• Bumper month for retail sales in May
• YoY retail sales values +6.8%, volumes +4.6%
• Flattered slightly by a very weak May 2025
• MoM volume growth of +1.2%
• More than double economist consensus forecasts (+0.5%)
• Shop price inflation declines from 2.9% to 2.2%
• YTD volume / ‘real’ growth of ca. +3.0%
• No impact on consumer demand from war in Middle East
• YoY grocery spend +4.1%, volumes +1.3%
• YoY non-food spend +7.4%, volumes +6.2%
• Discretionary goods out-perform non-discretionary
• Strong month for Electricals, Cosmetics, Jewellers, DIY, Garden Centres
• Soft demand for Chemists, Footwear, Textiles
• Online sales +3.3% MoM, +12.2% YoY
• Online penetration increases by +70bps to 28.8%
• May’s figures predate the World Cup
• World Cup unlikely to provide significant boost to demand
• Retail sales remain more sensitive to the weather than anything else.

Like Harry Kane left unmarked on the edge of the box at a corner kick, today’s retail sales have snuck in and delivered the goods. But, in fairness, they were as predictable as a Germany win over Curacao. Soaring value and volume growth on both a year-on-year, quarter-on-quarter and month-on-month basis. And declining inflation. Not what economists in any way forecast with the war in the Middle East ongoing.

Growth across the board

May’s outcome was actually fairly easy to call on two counts. Firstly, the more meaningful year-on-year figures were always going to be flattered by a terrible May in 2025. Secondly, the largely meaningless month-on-month figures concocted by the ONS to give an economist-friendly view of consumer demand were always going to be flattered by an artificially weak April.

Easy to predict the general trend, but the figures were nevertheless stellar. Year-on-year retail sales values (exc fuel) grew by +6.8% in May, with volumes ahead by +4.6%. Excluding the freaky COVID-bounce back months in 2021/2022, this was the best monthly sales performance since February 2002 (+8.7%). In volume terms, it was the best monthly sales performance since…January 2026 (+5.6%). The fact that in 2026 we have seen two months of ‘real’ growth of 4%+ and a monthly running average of ca. 3% surely a far better barometer of strong underlying consumer demand than any spurious month-on-month assessments?

For what they are worth (not much), the ONS month-on-month seasonally-adjusted estimates showed that volumes rose by +1.2% in May, more than double the economist consensus forecast of just +0.5%. May’s figure following a fall of -1.0% in April (revised up from a 1.3% fall in the previous release) and a rise of +0.7% in March (revised up from a +0.6% rise in the previous release). From +0.7% to -1.0% to +1.2% - meaningless yo-yos? I rest my case.

Inflation – coming down?

The retail sales data are not playing ball with the economist narrative in any shape or form. The inevitable response to today’s strong figures seems to generally be a pretty lame “it won’t last”. But that has been a familiar refrain now all year and we’re now five months down. Not every month will be as strong as May’s, but even a deceleration or the odd monthly blip won’t constitute the sustained consumer meltdown that most economists seem to be secretly praying for.

The other fall-back is the notion that retail sales are being propped by inflation and that ‘real’ growth has evaporated under the general consumer squeeze. Year-to-date volume / ‘real’ growth of ca. +3% certainly puts the latter notion to bed straightaway.

Even inflationary pressures are yet to play out the way they were expected. As announced earlier in the week, headline CPI was stable in May at 2.8%. The shop price inflation figures from today’s retail sales release tell a far more nuanced story. Shop price inflation actually declined sharply to just 2.2% in May from 2.9% in April. Inflation in grocery was 2.8% and in non-food it was just 1.2%. Too early to say definitively, but perhaps, just perhaps, inflationary fears may be overblown?

Performance by sub-sector

Usual variation in performance by sub-sector - and not a universal picture of joy.

Grocery sales grew +4.1% year-on-year and more encouragingly still, volumes were up by +1.3%, the best monthly performance since October 2025 and the first month of positive growth since March. As it always does, the weather was a strong contributory factor to this performance.

Higher headline growth in non-food (YoY values +7.4%, volumes +6.2%), but a more nuanced picture across the various sub-sectors. Again, economist logic not so much tested as shown up to be ridiculous, with soaring demand for many discretionary categories soaring.

According to the economist rulebook, in times of supposed hardship and inflationary squeeze, bulky and durable goods categories will be hardest hit as these are both ‘big ticket’ and discretionary. PCs & Telecoms (values +46.2%, volumes +51.3%), Electricals (+10.1%, +13.0%), Household Goods (+8.4%, +8.3%) and Furniture (+4.7%, +5.5%) are actually all streaking ahead, with Carpets (-0.1%, -4.2%) the only bulky goods category playing to type. May was generally a very strong month for most OOT categories, with demand also very strong for DIY (+13.4%, +11.1%) and Garden Centres / Petstores (+9.2%, +6.5%).

The standout high street category was Jewellery (values +22.6%, volumes +11.4%), again, not a sector one would readily associate with a cost-of-living crisis. In fact, a number of notions shot down in one – a highly discretionary sub-sector experiencing double digit inflation (11.2%) witnessing strong ‘real’ growth (+11.4%).

Core in-town categories such as Cosmetics (+14.1%, +12.4%) and Clothing (+9.0% and +8.0%) also performed well. More challenged sectors included Chemists (-12.2%, -13.4%), Textiles (-12.7%, -12.3%), Footwear (-7.9%, -7.4%) and Music & Video (-9.1%, -15.1%).

Online sales grew +12.2% year-on-year in May, and increased +3.3% month-on-month. Apparently, overall retail sales values only grew +0.9% MoM in May and accordingly, online penetration increased by +70bps to 28.8% in May. Hang on - MoM values +0.9%, volumes +1.2%, so we’re actually in deflationary territory? Another hole in the parallel universe of month-on-month comparisons.

For more detail, please refer to our accompanying Retail Sales Dashboard.

Where do we go from here?

Some media quarters will undoubtedly attribute strong retail sales performance to the World Cup, conveniently overlooking the fact that today’s figures relate to May and totally predate the tournament itself. Ironically, I’m normally inundated with journalist calls about the hugely positive effect the World Cup will supposedly have on retail sales – this year I’ve had none (thankfully), the narrative instead dominated by negatives of global geo-politics amd macro-economics rather than the supposed positives of a global football tournament.

Whisper it, but the reality is that neither the war in the Middle East nor the World Cup is likely to have a significant bearing on the high street and the UK consumer’s willingness and ability to spend money. No economist ever likes to hear it, but the weather will always win out as the key driver of retail sales. Maybe not over a long period of time (1 year+), but if you’re fixated on month-on-month comparisons, definitely yes.

If May was relatively easy to call, June will be much harder. The year-on-year comp is much tougher (June 2025 values +3.3%, volumes +1.2% compared to a really soft May 2025 values +0.2%, volumes -1.3%) so we will inevitably see significant deceleration. In month-on-month terms, May has set a high bar that will equally inevitably see a yo-yo decline in June. June may appear bad on these two counts, but the question has to be seriously asked if a month-on-month decline and a year-on-year deceleration actually constitute a slowdown?

The World Cup in itself may not move the needle on retail sales, but the weather just might. June may surprise on the upside on this basis. Would an England (or Scotland) World Cup win make all the difference to consumer demand? Probably not, but frankly, who would really care?