Retail Sales Drop As Consumers Rein In Spending

The ONS has published data on UK retail sales for May:

>>> Retail sales volumes fell by 0.5% in May 2022 following a rise of 0.4% in April 2022 (revised from a rise of 1.4%); sales volumes were 2.6% above their pre-coronavirus (COVID-19) February 2020 levels.

>>> In the three months to May 2022, sales volumes fell by 1.3% when compared with the previous three months; this continues the downward trend since summer 2021.

>>> The fall in sales volumes over the month was because of food stores, which fell by 1.6%; reduced spending in food stores seems to be linked to the impact of rising food prices and the cost of living.

>>> Automotive fuel sales volumes rose by 1.1% in May 2022, which may in part be linked to increased hybrid working and a fall in those working exclusively from home.

>>> Non-food stores sales volumes were unchanged (0.0%) over the month; an increase in clothing sales (2.2%) was offset by a fall in household goods (negative 2.3%), such as furniture stores, and department stores (negative 1.1%).

>>> The proportion of retail sales online fell to 26.6% in May 2022 from 27.1% in April but remains substantially higher than the 19.7% in February 2020 before the coronavirus pandemic.

Consumers Rein In Spending
Responding to the latest ONS Retail Sales Index figures, Helen Dickinson, Chief Executive of the British Retail Consortium, said:

“Households reined in spending as the cost-of-living crunch continued to squeeze consumer demand. Many customers are buying down, particularly with food, choosing value range items where they might previously have bought premium goods. High value items, such as furniture and white goods, were also impacted as shoppers reconsidered major purchases during this difficult time.

“Higher operational and input costs have filtered through to prices, meaning both retailers and their customers are in for hard times ahead. Retailers are doing what they can to support households by absorbing as much of the costs as possible, expanding their value ranges, offering discounts for some vulnerable groups, and investing in their own supply chains to reduce future costs. If costs continue to spiral, Government will need to be ready to support struggling households.”

Commenting on the Office of National Statistics retail sales figures for May 2022, Lisa Hooker, Industry Leader for Consumer Markets at PwC, said:

“Despite some recovery in high street footfall, the exuberance in the run up to the Platinum Jubilee celebrations and the sunny weather, all of these positives were unable to outweigh the wider drag of the cost-of-living crisis on retail sales.

“No matter whether comparing with last month or last year, including or excluding petrol sales, retail sales volumes declined, showing the pressures on consumers’ wallets. And, while pound note value sales increased, this was predominantly a result of inflation.

“Grocery sales were the biggest drag on retail sales performance last month. This may be surprising, given weaker comparisons from last year and coming 12 months after the full opening of hospitality following the end of the third national lockdown in 2021. However, with this week’s record inflation figures particularly driven by food and drink prices, there are already signs that consumers are cutting back and trading down in their supermarket trolleys. And even the restaurant and pub recovery appears to have stalled, with further headwinds this week given the national strikes.

“The one bright spot was clothing sales, as consumers refreshed their wardrobes for much postponed holidays and events over the summer. Other non-food categories such as spend on the home performed less well, as non-essential purchases continue to be put off.

“Online sales also continued to fall back from its pandemic highs, now falling to just 26.6% of retail sales, compared to almost 38% at its peak. While still significantly higher than pre-pandemic levels, it did provide some respite for the high street, with footfall recovering to some extent.

“Looking ahead, even the bright spots in this month’s retail sales appear both discretionary and temporary. Falling confidence and accelerating inflation in non-discretionary spending areas like utilities and food will further limit consumers’ ability to spend as the year progresses. Without further government assistance, the rest of 2022 is looking increasingly bleak for the retail sector.”

Source : ONS, BRC, PwC