Instant view - Royal wedding, weather boost retail sales

LONDON (Reuters) - Retail sales climbed more than expected in April, boosted by the extra holiday for the Royal Wedding and record temperatures, the Office for National Statistics said on Thursday.

While the strong monthly rise will provide some relief to retailers who have been hard hit by weak consumer morale, underlying sales growth remained weak as Britons face squeezed household budgets.

KEY POINTS

- Biggest monthly rise for a month of April since 2002

- Biggest monthly rise in predominantly food store sales since May 2008

- First annual rise in predominantly food store sales since Jan 2010

- Biggest monthly rise in textile, clothing and footwear sales since June 2009

- The ONS said the extra public holiday for the Royal Wedding on April 29, combined with the warm weather in April helped boost sales of clothing, footwear and food. It also helped sales at garden centres, which are included in the "other stores" category.

ANALYSTS' COMMENTS

VICKY REDWOOD, CAPITAL ECONOMICS

"April's strong 1.1 percent monthly rise in the official measure of retail sales volumes clearly supports other evidence showing that the high street enjoyed a bit of a bounce last month.

"What's more, unlike for example the BRC measure, these figures adjust for Easter timing effects and so their strength does not just reflect the later fall of Easter this year.

"Nonetheless, it still looks like sales were primarily buoyed by temporary factors -- namely the good weather and the royal wedding (and extra bank holiday).

"The upshot is that it is unlikely that this strength will persist. Not only did this week's inflation and pay figures show that the squeeze on real earnings is getting worse, but this morning's Nationwide figures showed consumer confidence falling further."

HOWARD ARCHER, IHS GLOBAL INSIGHT

"While welcome, we strongly doubt that the 1.1 percent jump in retail sales volumes in April is a sign that the consumer is roaring back to life.

"Rather, what it suggests is that pressurised consumers need a particularly favourable set of circumstances to part with their cash.

"We suspect that consumers are likely to keep a tight grip on their purse strings over the coming months. And the underlying softness of retail sales is evident in the fact that they were still only up by 0.2 percent in the three months to April compared to the three months to January.

"In addition to consumers' purchasing power currently being squeezed hard by high inflation and low wage growth, concerns over jobs, the economy and fiscal tightening increasingly kicking in from April are also clearly weighing down on consumer confidence and willingness to spend.

"The underlying impression remains that consumers have become significantly less willing, and able, to spend in recent months in the face of serious headwinds - most notably the squeeze on their purchasing power."

MARCHEL ALEXANDROVICH, JEFFERIES INTERNATIONAL

"I am not sure they are telling us anything very much. We've got a strong number anecdotally people were expecting anyway... the impact of the royal wedding and unusually warm weather on the number, so the number was good.

"But ultimately we won't know how good until the ONS provide a bit more clarification on how much these two things, the warm weather and royal wedding, how much they have boosted the level of overall activity on the high street in April.

"I think there's every chance that number falls back quite sharply in May."

HETAL MEHTA, DAIWA CAPITAL MARKETS EUROPE

"The better-than-expected retail sales figures have been distorted by the unseasonably warm weather and the royal wedding, so we would certainly not get carried away with one month's numbers. Indeed, we expect much of this strength to unwind in May.

"And with the labour market still weak, household debt remaining high and real incomes falling, growth in the consumer sector of this scale cannot be sustainable. We expect consumer spending to flatline this quarter."

RICHARD LOWE, HEAD OF RETAIL & WHOLESALE, BARCLAYS CORPORATE

"The retailers that did well in April were those which had summer stock in store in time for the bank holidays and warmer weather. They'd replenished stocks early in anticipation of Chinese New Year, which fell in February, and the disruption New Year causes to the Far East's supply chain as 200-million-plus migrant workers head home."

"And while many predicted the 'Middleton effect' to be a key driver of retail sales this year, few could have guessed Pippa, would also become such a high-profile figure -- good news for fashion and lifestyle brands who are able to align themselves to her new-found status."

JAMES KNIGHTLEY, ECONOMIST, ING

"UK retail sales have risen more than expected, boosted by warm weather and the combination of Easter and the royal Wedding.

"There was weakness in 'other stores', fuel and non-specialised sales though, while overnight the Nationwide measure of consumer confidence fell again.

"Indeed with household incomes failing to keep pace with the cost of living, we expect to see retail sales growth remain fairly modest through much of this year.

"That said, with CPI rising strongly and the UK labour market creating jobs we still feel that there is a good chance of a rate rise before year-end -- with November our favoured date."

AMIT KARA, ECONOMIST, UBS

"The monthly data tends to be very volatile. That said, we were above consensus, so we are not too surprised by the strength of today's outturn.

"The big picture is that UK households need to make a downward adjustment to their relative lifestyles. That's the medium-term outlook.

"The only relief here is lower commodity prices which will result in a rebound in real disposable income as well as taking the pressure of the central bank to raise interest rates."

GEORGE BUCKLEY, ECONOMIST, DEUTSCHE BANK

"I think there's going to be some distortion in these figures but it's going to be very difficult to work out how much is due to the weather or to the back-to-back bank holiday weekends. Some people might have gone out shopping but others might have gone away.

"In terms of policy implications it's very difficult to learn from this. On the face of it they are stronger numbers. It's looking a little better but I suspect we will get some pay-back in May."