UK retail sales posted a stronger-than-anticipated increase in May, according to official data released on Friday, as sunnier weather and retailer discounts encouraged consumer spending even though households remain cautious due to cost-of-living pressures resulting from the conflict in Iran.
Figures from the Office for National Statistics revealed that retail sales volumes rose by 1.2% in May, reversing a 1.0% decrease in April. This outpaced economists’ forecasts, which predicted a 0.5% increase for the month.
On an annual basis, May sales volumes were 3.2% higher, exceeding expectations for a year-on-year rise of 1.9%. Excluding fuel, sales volumes increased by 1.2% compared to April and climbed by 4.6% year-on-year.
Clothing stores and online retailers saw particularly strong demand, aided by the favourable weather and school holiday period. Department stores achieved their largest three-month gain since September 2024 as businesses aimed to attract shoppers through seasonal promotions and competitive pricing strategies.
However, retail industry representatives noted that despite these tactics, shoppers remained selective about their purchases and looked for value while weighing financial concerns.
Industry analysts observed that retailers are working to control prices for customers, aiming to sustain recent sales momentum amid persistent cost pressures. The upcoming FIFA World Cup and the busy summer shopping period are expected to provide further opportunities for sales growth.
Despite upbeat sales data, a separate survey pointed out that consumer sentiment did not improve in June. Younger age groups were reported as being the least positive about their financial prospects in two years, while overall willingness to spend on major items hit its lowest mark since January 2025.
The wider economic environment remains uncertain as major retailers referenced ongoing unease linked to the Middle East conflict. Although an interim agreement between the United States and Iran has offered reasons to be hopeful, businesses continue to monitor the possible effects on operating costs.
In broader economic data, figures last week indicated that the UK economy contracted in April for the first time since August. However, the Bank of England increased its projection for underlying quarterly growth to 0.2% for the current quarter.
Notably, the central bank maintained interest rates at 3.75% in its latest decision, with two policymakers supporting a hike.
