Wet weather and ongoing cost-of-living pressures continued to impact consumer spending in the UK last month, with retailers hoping major events such as the Euros and the Olympics will bolster trade this summer.
The BRC-KPMG Retail Sales Monitor shows total retail sales increased by only 0.7% year-on-year in May. This was above the three-month average growth of 0.3% but below the 12-month average of 2.0%.
Food sales rose 3.6% over the three months to May, but growth was below the annual average of 6.4%. However, for the month of May, food was in growth year-on-year.
Meanwhile, non-food sales slipped 2.4% over the three months, steeper than the 12-month decline of 1.7%. For the month, the sector also declined.
“Despite a strong bank holiday weekend for retailers, minimal improvement to weather across most of May meant only a modest rebound in retail sales last month,” said Helen Dickinson, Chief Executive of the British Retail Consortium (BRC).
She noted that although non-food sales fell over the course of the month, the long weekend did see increased purchases of DIY and gardening equipment, as well as strong clothing sales. There was also growth in computing sales as people continued to upgrade tech bought during the pandemic.
Dickinson added: “Retailers remain optimistic that major events such as the Euros and the Olympics will bolster consumer confidence this summer.”
Commenting on the performance of food & drink sector, Sarah Bradbury, CEO at IGD, said: “Grocery sales in May bounced back into growth following April’s decline, although it must be remembered with Easter falling in March this year, comparisons for April were always going to struggle.
“Although sales in May were back into year-on-year growth, the rate of growth is beginning to slow down as inflation continues its path back to normality. Further encouraging signs for the grocery sector include an increase in volumes during May; an improvement from last year.”
Separate data released today by Barclays showed that spending on debit and credit cards was only 1.0% higher in May than a year earlier, slowing from 1.6% annual growth the month before and the weakest increase since February 2021.
Barclays said 87% of consumers it surveyed were concerned about higher household bills, especially council tax, broadband and mobile bills and water charges. Almost half of consumers said they were reducing discretionary spending in areas such as summer clothing.
Jack Meaning, Chief UK Economist at Barclays, commented: ”The economic strength we saw in the first three months of the year was always expected to ease as we moved into the second quarter, with GDP having seen the extra bounce needed to recover the ground lost in last year’s recession.
“The underlying direction of travel remains though, with falling inflation, real income growth and low unemployment all pointing to a gradual acceleration in consumer spending over the next 12 months, especially as we begin to see the Bank of England reduce interest rates in H2.”
NAM Implications:
- In a flat-demand market, any improvement helps…
- …but realists appreciate that any growth will be at the expense of rivals.
- So best reassess relative competitive appeal…
- …and go for it.
