UK retail sales post surprise drop in May

Bloomberg

Sales fell 0.6 percent from April, the Office for National Statistics said Thursday in London. Economists predicted a 0.3 percent increase, the median of 28 forecasts in a Bloomberg News survey shows. Sales dropped 1.6 percent from a year earlier.

Bank of England Governor Mervyn King said Wednesday that Britain's path to full recovery may be "protracted" as banks keep rationing loans to consumers. J Sainsbury, the U.K.'s third-biggest supermarket owner, predicted that the economic environment will stay "challenging" in 2009.

"Unemployment will keep rising,'' said Amit Kara, an economist at UBS in London. "The economy will shrink in the second quarter. But it's looking better than it was a few months ago.''

On the year, the value of sales dropped 1.1 percent, the most since records began in 1988. The annual data are affected by "unusually large" estimates of retail sales a year earlier in May 2008, officials said.

Clothing, textiles and footwear retailers and department stores led the monthly sales decline in May, the statistics office said. Sales at non-food stores dropped 1.4 percent, outweighing a 0.3 percent rise at food stores.