Retail sales growth in the UK slowed to a six-month low in May as soaring food prices prompted shoppers to rein in their spending on non-essential items.
The figures from the British Retail Consortium (BRC) and KPMG show total sales increased by 3.9% last month, against a 1.1% fall a year ago. However, growth was below the 5.2% rise recorded in April, dashing hopes that a trio of bank holidays would get shoppers spending.
The data is not adjusted for inflation, so the volume of goods purchased would have fallen.
Food sales were up 9.6% over the three months to May. However, this was due to higher prices, and volumes were marginally negative despite a brief uptick from the events surrounding the Coronation of King Charles.
With consumers having to spend more of their income on everyday groceries, non-food sales increased by just 0.7%. High street retailers saw more categories slip into negative sales territory last month, whilst the gloom continued for online retailers after non-food sales decreased by 3.0%.
“With consumer confidence still recovering from record depths, and continued tightening of household incomes, we are unlikely to see substantial sales growth in the coming months,” said Helen Dickinson, Chief Executive of the BRC.
“But, with signs that inflation has possibly peaked, retailers are hopeful that confidence will continue to improve. Now is not the time for Government to impose more regulation and tax on business that will push up costs for retailers and prices for their customers.”
Paul Martin, UK Head of Retail at KPMG, added: “The wild card for the retail sector remains uncontrollable food inflation, which shows little sign of coming down in the near future, and this is having a significant knock-on effect on non-essential spending. The grocery sector is the fastest growing part of the consumer wallet at the moment, so consumers are having to spend more of their money in the one area that is getting disproportionately more expensive.
“UK consumers are resilient, but with stubbornly high food inflation continuing and the prospect of further interest rate rises threatening to impact their ability to spend elsewhere, it is likely to be a long, hot summer for the retail sector.”
Separate figures released today by Barclays also suggest high inflation and rising food prices are continuing to eat away at consumers’ spending power. The data showed that consumer spending on payment cards rose by 3.6% year-on-year in May, of which spending on groceries increased 8.9%, the highest growth in the category since February 2021 when it stood at 27.0%.
Barclays economist Silvia Ardagna commented: “Although the latest headline figures show that inflation has fallen due to lower energy prices, the prices of core services and goods remain stubbornly high and continue to constrain real household disposable income and spending.”
NAM Implications:
- Patently, volume sales are the New Reality…
- And consumers trying to cope with unprecedented cost-of-living price increases are clearly voting with their feet.
- With discretionary purchases an early (and ‘permanent’) casualty…
- Time for all businesses to translate the above into real growth expectations?
- (and high/low real inflation has little to do with it…)
