The value of retail sales rose by an annual rate of just 1% in May, the lowest rate this year and well below the average of 2.5% over the last five months.
The figure from the BRC-KPMG Retail Sales Monitor also lagged behind April’s inflation rate of 3.4%, suggesting a fall in real-terms spending.
Sales of non-food items decreased by 1.1% in May after demand for fashion and full-price big-ticket items was held back by lower consumer confidence.
However, food sales increased by 3.6% as the two bank holidays and good weather prompted spending on BBQs and picnics.
Helen Dickinson, Chief Executive of the British Retail Consortium (BRC), stated that consumers had “put the brakes on spending” at a time when retailers are grappling with the £5bn in extra costs from higher National Insurance contributions and wages.
Meanwhile, Linda Ellett, UK head of consumer, retail and leisure at KPMG, suggested that the sunny weather had meant some shoppers made seasonal purchases early, contributing to a slowdown in sales growth last month. She noted that spending was also dampened due to households being impacted by a rise in essential bills in April.
The BRC figures chime with those from Barclays, which today reported that credit and debit card spending had grown by an annual rate of just 1% in May, well down on April’s 4.5% increase as consumers became more cautious.
A survey by the bank found that confidence in household finances fell three percentage points to 67% last month, while the ability to spend on non-essentials fell four percentage points to 56%. This comes as discretionary spending was up just 2.0%, well below the 5.1 % recorded in April, as nearly half (46%) of UK adults reported intentions to reduce their outgoings.
In the grocery sector, the data shows spending grew only 0.9%, a significant drop compared to the 6.6% uplift the month before. Barclays said that the slowdown at supermarkets, which grew just 0.2%, could be due to price competition among the major providers, as well as the long-running trend of consumers seeking to extract more value from their weekly shop.
A bank’s consumer survey showed that more than half (57%) are actively trying to reduce their grocery bills, with people in this group turning to loyalty schemes (57%), discounted products (54%), discount supermarkets (49%), and own-brand alternatives (46%).
Other popular strategies include stockpiling favourites (39%) and relying on the ‘big weekly shop’ instead of smaller ad hoc ‘top-up’ shops (29%).
Barclays’ head of retail, Karen Johnson, stated that shoppers were “becoming more value-conscious as financial pressures persist”, balancing essential spending with small luxuries such as cinema trips, garden projects, or short breaks. And while sunshine in the first half of the month helped sales, she added: “Longer-term uncertainty continues to shape how and where people choose to spend”.
NAM Implications:
- No surprises, hopefully?
- We are living through unprecedented times…
- …when any real growth comes at the expense of rivals.
- Good weather shifts spending patterns to suit, where possible.
- Consumers are hurting…
- …and their resulting falling confidence (and trust) is impacting demand as they shop around for value.
- And realistic suppliers and retailers seek to optimise relative competitive appeal…
