UK retail sales fall again as rising living costs bite

Takings tumble for third successive month as inflation figures expected to show sharp rise in price of household essentials

Britain’s retailers suffered a third consecutive month of falling sales in March, according to industry figures that add to evidence that a post-referendum rise in living costs is denting consumer spending.

In advance of official inflation figures on Tuesday, expected to confirm sharper price rises in the shops, the British Retail Consortium (BRC) said takings were down 1% compared with March last year.

Its monthly snapshot showed that a dip in demand for clothing, toys and household appliances contributed to the biggest fall in like-for-like sales for a year and a half.

But the BRC cautioned that the latest figures were distorted by the timing of Easter, which falls in April this year but was in March in 2016.

Sales pattern

However, the lobby group said a slowdown in non-food sales was persisting and the underlying trend for that part of the market was the weakest for almost six years.

The figures follow official data from the Office for National Statistics showing retail sales fell in December and January but recovered slightly in February.

Retailers face the dual pressures of cautious consumers and rising operating costs this year. Their labour costs have risen with an increase in the national living wage, transport costs are up on higher oil prices and imported goods are more expensive because of the pound’s sharp fall since the Brexit vote last June.

Paul Martin, the UK head of retail at the report’s co-authors KPMG, described the sales drop in March as a disappointing end to the first quarter for retailers.

“Easter being later in the year is likely to have contributed to the bleaker picture, alongside the other obstacles facing the sector – especially increased input costs,” he said.

“Food sales remained in the black for a full quarter, although this is largely being driven by rising inflation, so no reason for too much celebration. Women’s footwear certainly stepped up, encouraged by the arrival of spring collections. Meanwhile, the rise in jewellery and beauty products is likely to have been helped by Mother’s Day.”

Over the three months to March, food sales decreased 0.2% on a like-for-like basis but increased 1.2% on a total basis, which does not adjust for the effect of store openings.

“This marginal growth in food was bolstered by slightly higher shop prices following increases in global food commodity costs and a weaker pound,” said the BRC’s chief executive, Helen Dickinson.

Economists have forecast that people will be left with less cash to spare for discretionary spending this year because they are having to spend more on essentials such as food, household bills and fuel as prices rise.

Meanwhile, wage growth is widely expected to slow, leaving people worse off in real terms. As a result, the Bank of England and other forecasters expect weaker consumer spending to drag on economic growth this year.

Inflation figures for March, due on Tuesday morning, are expected to show the measure of price rises held at 2.3%, its highest for more than three years, according to a Reuters poll of economists. But some predict inflation possibly eased thanks to softer petrol prices and the later timing of Easter holidays making airfares lower than in March 2016.

A separate report on Tuesday from Barclaycard suggests the higher cost of filling up the car is taking a significant chunk out of household budgets for motorists.

It found spending on petrol was up 16.1% in March compared with a year earlier. But the report, based on data from credit and debit card transactions, signalled consumers were still happy to treat themselves.

As the weather improved, spending on pub trips rose 12.5% on a year ago and restaurants enjoyed a similar 12.2% jump. Sales at DIY stores and garden centres were up 4.2% and 9.5%, respectively.

Barclaycard said its polling of consumers showed a higher proportion - 41% - were confident in the UK economy in March but that the prospect of higher prices later in the year would prompt a third to shop more at discount stores this year.

More than half – 52% – were more worried about the cost of day-to-day items than they were this time last year, with 74% citing a more expensive weekly shop as the reason.

“While confidence levels have steadily improved over the past six months, consumers remain fully aware of the potential impact of inflation on their household budgets,” said Paul Lockstone, managing director at Barclaycard.


Katie Allen

The GuardianTramp

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