Retail sales down as consumers start to feel the pinch

Owen Stevens
June 6, 2017

Retail sales sank last month and online trading hit record lows as shoppers tightened their belts in the face of rising inflation, new figures have shown.

Helen Dickinson OBE, Chief Executive, British Retail Consortium said: "After the pick-up in sales over Easter, consumer spending slowed again in May resulting in nearly flat growth on the previous year".

It comes as average earnings increased by 2.4 per cent in the year to March, below inflation which is running at 2.7 per cent and hence eating into people's spending power.

Plunge: Online sales growth more than halved in the year to May from 13.7% to 4.3%.

KPMG UK boss Paul Martin added: "After the surge in retail sales last month - the by-product of this year's relatively late Easter - retailers have been brought back down to earth with a thump".

A separate report, also out today, highlighted similar patterns whereby consumers started to rein in spending.

The BRC, which monitors sales with the accountancy firm KPMG, said the decline was "striking".

On a total basis, sales rose 0.2 per cent in May, against a growth of 1.4 per cent in May 2016. Sales across non-food retailers has slowed sharply since the turn of the year with personal finances coming under increasing pressure from rising inflation and weaker wage growth. Year-on-year spending growth fell to 2.8 percent, its lowest since just after June 2016's Brexit vote, from 5.5 percent in April.

Over the three-months to May, non-food retail sales in the United Kingdom decreased 0.3% on a like-for-like basis and increased 0.1% on a total basis, below the 12-month Total average growth to 0.5%.

"Although there are signs of some rebalancing of economic activity toward external trade, the United Kingdom for now remains a consumer-led economy; hence consumer spending will be a key driver of growth in 2017 and beyond, even though it will likely slow as higher inflation - expected to average 2.6% this year - squeezes household budgets", a May S&P report said.

Much like the U.S., Britain's economy is powered by consumer spending.

Dickinson called on the next government to secure a tariff-free trade deal with the European Union and for European migrants working in the British retail sector to be given assurances that they can continue to live and work in the United Kingdom after Brexit.

Other reports by VgToday

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