Shoppers scale back non-essential spending as cost of living bites
New figures from the BRC covering the four weeks to 25 February found that total retail sales increased by 5.2% from the previous four weeks. That’s down from the 6.7% increase recorded a year ago, and below the three-month average growth of 5.5%.
However, it found that much of that rise was down to the high level of inflation, which meant that the value of items sold was higher, even if volumes were weaker.
The report noted that while the cost of living crisis has made people more price sensitive, there is still a willingness to celebrate special occasions, which was exemplified by strong sales of fragrance and jewellery for Valentine’s Day. Equally, there was continued high demand for items that may lead to savings elsewhere, such as energy-saving appliances.
Helen Dickinson OBE, chief executive of the BRC, suggested that many shoppers would be concerned at the prospect of higher energy prices and tax rises in April.
She continued: “To protect people from ongoing price rises for goods, Government must avoid additional regulatory costs on business that compromise retailers’ ability to invest in lowering prices and in other areas that would contribute to the UK’s economic recovery.”
Spending on the essentials
Paul Martin, UK head of retail at KPMG, said that the figures demonstrated households are focusing their spending on only the most essential items. He pointed to sales of clothing, footwear and accessories falling, while there are also signs that sales of furniture and homeware are dropping year on year.
Martin added: “With increases in energy, broadband, mobile phone and council tax bills on the horizon, consumers will continue to take steps to reduce spending where they can – switching where they shop, what they buy, whilst also cutting back on activities such as eating out and takeaways. “
The challenge of food inflation
One of the biggest challenges facing households at the moment is the rising price of food and drink. According to the most recent data from Kantar World Panel, food price inflation is now at a record high of 17.1%, while the prices of basic food items have seen particularly substantial increases.
The BRC report found that food sales increased 8.3% on a total basis over the three months to February, almost double the 12-month average growth. However, Susan Barratt, CEO of IGD, pointed out that this is driven by historically high inflation levels ‒ which are showing little signs of abating ‒ with volume sales actually declining.
She continued: “Despite energy prices beginning to fall, the fact that food inflation remains stubbornly high means consumers’ trust and confidence is declining. With food supply chains challenged for fruit and vegetables, food availability concerns among shoppers remain high and fewer shoppers trust the food industry to ensure good availability.”