UK retail sales fell last month as soaring food prices and the wider cost of living crisis forced consumer to cut back on spending.
The volume of goods sold in stores and online fell 0.5 percent from April, the Office for National Statistics (ONS) said yesterday.
Economists had expected a decline of 0.7 percent. Sales excluding auto fuel fell 0.7 percent.
Photo: Reuters
The drop — the third in the past four months — was driven by a 1.6 percent fall in food sales, particularly at large supermarkets, which the ONS linked to soaring prices.
Data earlier this week showed overall inflation hit a four-decade high of 9.1 percent last month.
“Feedback from supermarkets suggested customers were spending less on their food shop, because of the rising cost of living,” said Heather Bovill, ONS deputy director for surveys and economic indicators.
Figures earlier yesterday showed higher prices were also weighing heavy on consumer confidence, which dropped to a record low this month.
BLEAK JULY
The outlook for stores also looks bleak, with the Confederation of British Industry on Thursday saying that retailers were also expecting a poor July.
Taken together, the reports show the deep damage that the fastest inflation rate since the 1980s is having on the economy. With wages failing to keep pace with rising prices, consumer finances are being squeezed and leading to a more gloomy outlook than during the depths of the COVID-19 pandemic.
“Britain faces a stark new economic reality,” said Joe Staton, client strategy director at GfK. “History shows that consumers will not hesitate to retrench and tighten their purse strings when the going gets tough.”
The survey is the first since the government announced a multibillion-dollar package of support for households to help them cope with soaring energy bills and the latest drop suggests even that unprecedented aid is not enough to bolster sentiment.
RETAIL DRAG
Sales at supermarkets fell 1.5 percent last month, while sales of tobacco, alcohol and other drinks dropped 4 percent, the ONS said.
Total sales were 1.3 percent lower in the three months through May than during the December-to-February period, suggesting the retail sector would act as a drag on the economy in the second quarter.
Sales in April rose just 0.4 percent, rather than the 1.4 percent previously estimated.
Meanwhile, GfK yesterday said its measure of consumer sentiment dropped 1 point to minus-41 this month, the lowest reading in the 48 years of the survey.
The risk of recession weighed on consumers’ view of the future outlook both for their own finances and the broader economy.
The prospects of a summer of industrial action and soaring interest rates are also weighing heavily on the mood of the nation, with the Bank of England indicating it is prepared to sacrifice economic growth to lean against higher pices.
RECESSION?
With the economy already on track to shrink in the second quarter, the risk is that ebbing confidence weighs further on spending, delivering a recession later this year.
More pain also lies ahead, with the Bank of England predicting inflation would climb above 11 percent, more than five times its target, as more energy bill hikes kick in come October.
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