Retail sales in the UK suffered their steepest drop in 18 months last month as consumers cut back on purchases of food and household goods.
Figures from the Office for National Statistics (ONS) show sales volumes slid 2.7% month-on-month in May, a much worse result than the 0.5% decline forecast by economists.
After a 4.7% jump in April, food stores saw a drop of 5% in May. This was led mainly by reduced volumes in supermarkets as shoppers made cutbacks amid rising inflation in the sector, alongside reduced sales of alcohol and tobacco products.
In non-food stores, sales volumes slid 1.4% over the month, mainly because of falls in clothing (-1.8%) and household goods (-2.5%). The downturn was blamed on reduced footfall and consumers completing home projects earlier than usual this year because of good weather.
The monthly fall is the first this year and follows a 1.3% rise in April when unusually sunny weather boosted demand. On a year-on-year basis, retail sales volumes were down 1.3% in May.
The disappointing figures come amid growing evidence that the UK economy is cooling after a robust start to the year. The economy contracted in April by 0.3% (ONS) as businesses cut jobs and cancelled investment plans in response to higher taxes and the uncertainty created by Donald Trump’s tariff war.
Paul Dales, Chief UK Economist at Capital Economics, commented: “The sharp 2.7% m/m drop back in retail sales volumes in May adds to other evidence that the burst of economic growth in Q1 is over. That said, consumer spending may still outperform other areas of the economy this year.”
Meanwhile, Nicholas Found, Head of Commercial Content at Retail Economics, said: “May’s retail performance underlines a shift in consumer behaviour, with households putting value at the centre of spending decisions and pulling back on non-essential purchases. This follows a tough April that saw discretionary budgets squeezed by rising household bills.
“The cost of living remains the dominant concern for households. An uptick in food inflation is especially visible to shoppers, acting as a psychological anchor on confidence that hits non-essential retail spending.
“Households are deferring spending on full-price fashion, big ticket home items and other discretionary goods, instead prioritising travel and experiences into the summer.
“Retailers are now in the precarious position of needing to stimulate demand without eroding margins. But with a £6.5bn surge in operating costs this year, driven by increases in employment costs, business rates and utilities as our research with Barclays Corporate Banking shows, many are entering the summer trading period under significant pressure.”
NamNews Implications:
- Hopefully, only the authorities are surprised by these developments…
- i.e. any realistic business sees a market made up of uncertainties and inevitabilities…
- …where any real growth has to come at the expense of rivals.
- Deep down, people don’t trust what they are being told…
- …and are cutting back accordingly.
