Latest data shows that shoppers in the UK reduced their spending last month by the most since the country was in a Coronavirus lockdown in early 2021 as they tightened their belts amid the cost of living crisis.
According to the BRC-KPMG retail sales monitor, total spending in May was 1.1% lower than a year earlier and worse than April’s 0.3% decline.
Furniture, electronics and other expensive goods were hit hardest, but fashion and beauty sales rose as people prepared for holidays and the summer.
On a like-for-like basis, there was a 1.5% annual fall in spending after a 1.7% contraction in April. However, the figures are not adjusted for inflation – which hit 9.0% in April – meaning the fall in volumes of goods purchased will have been much greater than the drop in money spent.
“It is clear the post-pandemic spending bubble has burst, with retailers facing tougher trading conditions, falling consumer confidence, and soaring inflation impacting consumers spending power,” said BRC Chief Executive Helen Dickinson.
“Supply chain issues, including rising commodity and transport costs, a tight labour market and higher energy bills are forcing retailers to increase their prices, contributing to wider inflation. Profits may be squeezed further, as retailers make significant investments in their own operations and supply chains to mitigate against future price rises for consumers.”
Separate data released today by Barclaycard, which covers a broader range of consumer expenditure, showed spending in May was up 9.3% from a year earlier. This reflected the rising cost of living and a bounce for the travel and hospitality sectors that were affected by Covid restrictions last year.
Spending on essential items rose by 4.8%, pushed up by a nearly 25% jump for petrol and diesel, which have soared in price in recent months. In response, consumers cut back on spending on digital content and subscriptions by nearly 6%. Spending on furniture also fell by 3.1%, whilst spending on restaurants and pubs slipped by 6% and 1% respectively as consumers looked to save money.
“The cost of living squeeze is clearly influencing discretionary spending habits,” said Jose Carvalho, head of consumer products at Barclaycard.
“Despite this, there are some encouraging signs, particularly in the travel industry as Brits’ appetite for going abroad continues to grow as we approach the summer holidays.”
Meanwhile, earlier evidence suggests the four days of jubilee celebrations provided a much-needed boost for retailers and the hospitality industry. BRC data shows the number of people visiting shops last week was up 17.1% on the average for May, whilst Barclaycard pointed to a 41.5% rise in spending at restaurants over the Bank holiday weekend compared to the same period last year.
NAM Implications:
- Good to assess inflation-adjusted figures (i.e. volume) to determine the real impact of lockdown.
- ‘the post-pandemic/lockdown bubble has burst’ says it all…
- Retailers will/have to pass on the pressures of supply chain issues, via shelf price increases…
- …and pressure on suppliers to share the burden.
- Watch this space…
