March Retail Sales in the U.K. Defy Expectations, Rise 0.4%

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U.K. retail sales unexpectedly rose by 0.4% in March, despite consumer confidence taking a hit from U.S. President Donald Trump's tariff announcements. This increase followed a revised 0.7% gain in February, according to the Office for National Statistics. Economists had expected a 0.3% decline.

On an annual basis, retail sales grew by 2.6%, surpassing the 1.8% forecast and up from a 2.2% increase in February. This strong performance contrasted with a sharp drop in consumer sentiment, as highlighted in a survey by the British Retail Consortium, which showed a year-low -48 balance for consumer confidence in April, down from -35 in March.

The survey, conducted shortly after Trump’s tariff announcements, reflected a significant drop in economic outlook. The tariffs, set at 10% minimum and higher for many U.S. trading partners, remain a significant issue for the U.K. government, with Chancellor Rachel Reeves meeting U.S. Treasury Secretary Scott Bessent to discuss potential relief.

The Bank of England, which held its key interest rate at 4.5% in March due to persistent inflation, is expected to cut rates in May, as inflation continues to pressure the economy. The IMF forecasts U.K. inflation to remain the highest among advanced economies at 3.1%, and predicts slower growth of 1.1% in 2025, partly due to the global impacts of the U.S. tariffs.

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