Official data confirms that retail sales in the UK fell last month as squeezed households cut back on food spending amid surging inflation.
According to the Office for National Statistics (ONS), retail sales volumes fell by 0.5% in May, following a rise of 0.4% in April (revised from an increase of 1.4%). The fall over the month was mainly attributed to food stores, which fell by 1.6%. The ONS stated that the reduced spending in supermarkets seemed to be linked to the impact of rising food prices and the cost of living.
Emma-Lou Montgomery from Fidelity International commented: “With prices for even the most basic foods and goods rising substantially, many consumers are already adopting more defensive spending behaviours, such as self-imposed checkout limits.”
Earlier this week, the Chairman of Asda, Lord Stuart Rose, stated that its cash-strapped customers were putting less in their baskets and switching to budget ranges after inflation hit a 40-year-high of 9.1% in May.
“People are trading back. They are worried about spending,” he said. “They’ve got a limit that they’ve set out, too. They say £30 is one limit… and if they get to more than £30 then that’s it, stop. It’s the same with petrol.”
Tesco has also said it is seeing early signs that consumers are changing their habits due to rising food prices, whilst industry data suggests people are shopping more in discounters to save money.
The overall retail sales drop was marginally better than economists had feared, with City consensus pointing towards a 0.7%.
Non-food stores sales volumes were unchanged (0.0%) over the month, with an increase in clothing sales (+2.2%) offset by a fall in household goods (-2.3%), such as furniture stores, and department stores (-1.1%).
Lynda Petherick, retail lead at Accenture, said: “Today’s slight drop in sales won’t come as a surprise to a sector contending with rapidly rising costs, as well as pressure to keep prices low for struggling households.
“Inflation remains a key issue for retail businesses, who are having to grapple with growing supply chain costs, as well as keeping their stores afloat and staff well compensated. For consumers, rising costs for staple goods mean many don’t have excess money to spend on discretionary items.
“There have been calls to help consumers by keeping prices down, which will be easier said than done for retailers. Increasing costs will have left many firms short this summer, particularly at a time when customers are usually spending more.”
Nicholas Farr from Capital Economics added: “With a further rise in inflation over the coming months set to exert a bigger squeeze on households’ real incomes, retail sales will probably continue to struggle ahead.”
NAM Implications:
- Regular NamNews readers will not be surprised…
- …and are prepared for the worst.
- Time to count every ‘penny’.
- i.e. Divide planned expenditure by your net margin and multiply by 100…
- …to calculate the incremental sales required to fund the purchase.
