March sunshine warms British consumption, April tariff storm severely hits confidence.

In the first quarter of the year, retail sales in the UK reached their strongest performance since 2021, but consumer confidence subsequently declined due to Trump's tariff policies. The UK's Office for National Statistics said on Friday that record-breaking sunny weather in March pushed retail sales up for a third consecutive month, with sales increasing by 0.4% month-on-month. This data far exceeded expectations of a 0.4% decrease, resulting in overall sales growth of 1.6% for the first quarter. The data shows that the UK economy is gaining momentum, with household consumption finally easing after a prolonged period of cautious spending since the Labour Party took office last summer. However, trade tensions combined with a series of annual price increases from council taxes to energy bills have dampened household confidence in April, potentially jeopardizing the long-awaited consumer recovery. GfK announced on Friday that the consumer confidence index dropped by 4 points to -23 in April, reaching a new low during the Labour Party's time in power. Another survey by the British Retail Consortium earlier this week was even more pessimistic. The index measuring the economic situation for the next three months plunged to -48 in April, significantly worse than March's -35. Alex Cole, a macroeconomist at Capital Economics, pointed out: "The growth in March was mainly due to exceptionally sunny weather, while the decline in confidence triggered by the US tariff turmoil in April suggests that households may tighten their spending in the coming months." Sunny weather boosted UK retail sales last month According to the UK's Office for National Statistics, England experienced its sunniest March on record, with overall sunshine hours ranking third historically, driving growth in clothing sales. Non-food sales increased by 1.7%, completely offsetting a 1.3% decline in food and groceries. Bloomberg economist Niraj Shah said: "The UK economy started the year off strong, but Trump's announcement of tariffs and multiple annual price increases in April could hinder the recovery, making it difficult for this momentum to continue." This is the strongest sales growth period since early 2021 when the country emerged from the impact of the pandemic lockdown. Retail sales are expected to contribute nearly 0.1 percentage points to GDP for the first quarter. The currency market maintains the bet on the Bank of England cutting interest rates by 25 basis points at its May meeting, but expectations for further rate cuts have slightly decreased. However, policymakers will not easily rejoice at the signs of 'household consumption shaking off the extreme caution of recent years.' Despite a significant increase in real wages and a decrease in mortgage costs improving household finances, the GfK survey showed another blow to confidence, with the consumer confidence index falling to -23. UK consumer confidence drops to lowest level since late 2023 This decline in confidence brought the index to its lowest point in 17 months, worse than economists' expected -21. GfK attributed the weakening of confidence in economic prospects as the main reason. Neil Bellamy, director of consumer insights at GfK, said: "Consumers are not only facing multiple price increases in April, such as utility bills, council taxes, stamp duty, and road taxes, but also hearing stern warnings about the possibility of inflation resurging due to Trump's tariffs."