Retail sales in the UK unexpectedly fell last month amid crumbling consumer confidence due to accelerating inflation.
Official ONS data shows retail sales volumes were down 0.3% in February from the month before. Economists had forecast a rise of around 0.6% following a 1.9% increase in January.
The fall was blamed on stormy weather deterring some shoppers from visiting the high street and a 0.2% fall in food retail sales due to increased confidence in eating out in pubs and restaurants.
Online sales volumes also fell by 4.8% over the month. The channel now accounts for 27.8% of retail sales, its lowest proportion since March 2020 (22.7%), continuing a broad downward trend since its peak in February 2021 (37.7%).
“After a buoyant January, retail sales fell back a little last month,” said Heather Bovill, ONS deputy director for surveys and economic indicators.
“There was a notable decline for companies that predominantly trade online, following a strong performance over the festive and new year period.”
She pointed out that consumers were venturing out more and socialising, as well as returning to the workplace after Covid restrictions were eased. This meant it was a good month for clothing and department stores with people looking to expand their wardrobe. But household goods and many other stores reported a decrease.
Separate data released today showed that consumer confidence in the UK continues to nosedive as the cost-of-living crisis deepens.
GfK’s Consumer Confidence Index decreased five points to -31 in March, with all five measures down in comparison on the same time last month.
“A wall of worry is confronting consumers this month and there is an unmistakable sense of crisis in our numbers,” said Joe Staton, Client Strategy Director GfK.
“Consumers across the UK are experiencing the impact of soaring living costs with 30-year-high levels of inflation, record-high fuel and food prices, a recent interest-rate hike and the prospect of more increases to come, and higher taxation too – all against a background of stagnant pay rises that cannot compensate for the financial duress. This is the fourth month in a row that UK consumer confidence has dropped.”
Pointing to the war in Ukraine and rising Covid cases, he said: “The outlook for consumer confidence is not good; it’s certain there’s more bad news to come.”
Meanwhile, Lisa Hooker, consumer markets leader at PwC, said that despite a strong recovery by the retail sector over the last year, there are already signs that the cost-of-living crisis is hitting confidence.
“Almost all of the slowdown in sales in February was accounted for by a decline in non-grocery sales,” she added.
And the coming months could be disruptive for retailers, stated Aled Patchett, head of retail and consumer goods at Lloyds Bank.
“The impact felt from the cost of living crisis is expected to become particularly acute quite quickly,” he said. “There is also the effect the conflict in Ukraine is having on certain supply chains, still struggling to recover from the strains of the last two years, and the uncertainty the situation creates for businesses.”
