Thursday, December 8 2022

UK retail sales are falling at a pace not seen since the worst months of the pandemic, industry bodies say, as soaring inflation hits household finances, according to new data.

Retail sales volume fell for the third consecutive month in June, falling at an annual rate of 1%, according to figures compiled by advisory services group KPMG and industry body British Retail Consortium.

Helen Dickinson, chief executive of the British Retail Consortium, said sales volumes are “falling at a rate not seen since the depths of the pandemic, as inflation continues to bite and households cut spending”.

She added that discretionary purchases have been hit particularly hard, particularly appliances and housewares, while consumers have opted for cheaper brands when shopping for food and other products.

The Queen’s Jubilee weekend, June 2-5, provided a temporary boost to food sales. At the same time, the fashion sector has benefited from the arrival of summer and the wedding season. But, Dickinson said, “that was not enough to counter the substantial slowdown in consumer spending.”

BRC noted that its calculations were not adjusted for inflation, which hit a 40-year high of 9.1%, meaning the recorded drop in retail sales masks a bigger fall.

BRC’s monthly retail data is released earlier than official figures, which confirmed in May that retail sales volume fell that month.

Official data to be released on Wednesday is expected to show that falling sales contributed to weak economic performance in May, with economists polled by Reuters predicting the economy stagnated last month, with UK output showing no growth since January.

Consumer spending data tracked by payments firm Barclaycard, which monitors nearly half of all credit and debit card transactions in the UK, showed household bills continued to rise.

Household spending on utilities jumped around 40% in June, with spending on auto fuel rising around 25%, exposing pressure on household income as energy prices rise .

In contrast, spending on household goods fell 5.1% in June from May, while spending on home renovations and furniture stores fell 7.4% and 2.7%, respectively.

José Carvalho, head of consumer products at Barclaycard, said the continued rise in fuel, food and energy prices “means consumers need to budget and seek value where they can for essential purchases. and non-essential”.

Similar trends were reported by the Office for National Statistics based on data from fintech firm Revolut. The analysis showed that UK entertainment spending was down 20% in the first week of July compared to February 2020, before the pandemic.

However, fuel expenses have increased by 70% over the same period. James Andrews, personal finance expert at comparison website Money.co.uk, said the trend “could prove to be the prelude to a painful recession later in the year”.

There were strong indications that the restart of travel and events had given certain sectors a boost. Spending in restaurants was down 3.3% from June 2021, but up 0.8% from the previous month, according to Barclaycard data.

Spending on travel agents, airfare and hotels, resorts and accommodations also surged last month as vacationers rushed to book summer getaways.

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