Retail sales volumes in the UK stagnated last month after a fall in food and department stores offset growth at clothing outlets and petrol stations.
Data from the Office for National Statistics (ONS) shows the quantity of goods bought was unchanged between February and March following a revised 0.1% increase in the previous month.
The result was weaker than the 0.3% expansion forecast by economists, but it was still an improvement on the contraction recorded for most of last year.
Whilst inflation has eased in recent months, ONS senior statistician Heather Bovill noted that retailers were still saying higher prices have hit trading.
Automotive fuel and non-food stores saw sales volumes rising by 3.2% and 0.5% respectively, whilst food stores and online retailers saw declines of 0.7% and 1.5%.
The ONS noted that overall sales across the three months to March were up 1.9%, driven by the strong performance recorded in January after a poor Christmas. The figure for the first quarter of 2024 is the fastest quarterly growth since 2021.
While last month’s performance is not expected to damage the UK’s exit from recession, it suggests that consumers are still carefully managing their budgets.
Many economists believe rising real wages, falling inflation, cuts in national insurance, and the increase in the living wage will all help household incomes and boost spending.
However, Gizem Günday, partner at the consultancy McKinsey, cautioned that “household confidence about declining inflation does not seem to be feeding through to increased sales volumes at the tills just yet”.
A measure of consumer confidence released today showed it had increased for a sixth consecutive quarter to its highest level since the summer of 2021.
Deloitte’s analysis showed an increase of 6.5 percentage points on this time last year. Its survey cited an improvement in personal finances as inflation eased.
Céline Fenech, the firm’s consumer insight lead, said: “It is encouraging to see that consumers are feeling more confident in their personal finances – particularly younger consumers. Many consumers are paying less for essentials such as utility bills and groceries as inflation falls. However, spending on non-essential goods and services dropped this quarter, meaning that improving confidence is not yet translating to a significant boost to spending, and cautious optimism is required.
“There are some positive signs that consumers might be starting to loosen their purse strings, with more wriggle room for spending on discretionary items or services. We are seeing the rate at which consumers are increasing their defensive behaviours easing, for example fewer consumers buying goods on promotion or from cheaper supermarkets.
“Consumer confidence at its highest level in two-and-a-half years combined with the weather hopefully improving, should signal a brighter outlook for the consumer sector.”
NAM Implications:
- Apart from what the politicians say, we still inhabit uncertain times…
- …and consumers need more time to rebuild trust.
- Meanwhile, back to basics…
- …and aim at growing at the expense of rivals.
