Cost-of-living concerns causing shoppers to cut back
That’s according to the latest data from the British Retail Consortium (BRC).
While it found that overall retail sales increased by 5.7% in April, inflation meant that the actual volumes of both food and non-food products were down. As a result, while the amount spent increased, the actual amount being bought fell in the month.
Helen Dickinson chief executive of the BRC, noted that shoppers were continuing to “adjust spending habits”, with clothing sales in particular underperforming, in part due to poor weather.
She added: “Retailers hope sales will improve over the warmer summer months, especially as consumer confidence stabilises and inflation begins to ease. However, they continue to face huge cost pressures from a tight labour market, high energy prices, and other rising input costs, with many retailers reporting lower profits this year as a result.
“Government needs to ensure that any additional regulatory cost burdens are kept to a minimum as these add to inflation.”
Paul Martin, UK head of retail at KPMG ‒ which works with BRC to collate the data ‒ suggested that consumer demand has been “fairly resilient” against high inflation and interest rates up to now.
However, he warned that with government energy support ending and household finances under pressure, “it is likely that the next few months will continue to be challenging as the consumer tank empties”.
How our spending is changing
The findings are echoed by new research from Barclays, which found that overall consumer card spending only grew by 4.3% in April, less than half the current consumer price index with housing (CPIH) rate of inflation.
For example, it found that spending on groceries increased by 5.5%, though the Office for National Statistics has determined the food inflation rate is now 19.2%.
Barclays also noted that spending on fuel dropped by 9.3%, due to falling petrol and diesel prices, though spending on public transport increased by 11.9% on a year ago.
The largest uplift was on utilities, which jumped by 34.4% on a year ago.
Despite the change in shopping habits, Barclays found that spending on non-essential items rose by 4.6% on a year ago, which it put down to Easter and bank holidays.
There was also a big rise on spending on entertainment of 12%, driven by ticket sales for concerns and shows.
Abbas Khan, UK Economist at Barclays, said that the high rate of inflation was squeezing disposable incomes, though this was somewhat offset by the drop in wholesale energy prices and the price cap.
He added: “The data suggests that pockets of the economy, particularly the leisure sector, enjoyed some renewed momentum in April. Going forward, while energy bills are set to fall from Q3, higher mortgage rates cloud the outlook as households continue to refinance at significantly higher rates through the year.”