Yahoo Finance UK retail sales plunge amid cost of living crisis
UK retail sales took a heavy hit in March as consumers tightened their belts amid a cost of living crisis.
The Office for National Statistics (ONS) said sales volumes fell 1.4% in March, faster than the 0.5% drop in February. Still, they remain 2.2% above pre-COVID levels of February 2020.
Online sales were hit particularly hard as people tightened their belts, dropping 7.9% in the month – following on from a 6.9% fall in February.
The ONS said this is because people are eating out more but also pointed to the impact of rising food prices on the cost of living.
Read more: Cost of living crisis: How consumers are cutting spending
Fuel sales also fell as people cut non-essential travel amid record petrol and diesel prices.
“Retail sales fell back notably in March with rises in the cost of living hitting consumers’ spending,” said Darren Morgan, ONS director of economic statistics.
Retail sales volumes fell 1.4% in March, with the biggest driver coming from ‘non-store retailing’ (including online shops), which fell 7.9%.
However, retail remains 2.2% above its pre-pandemic level https://t.co/q4w0Tx8mQk pic.twitter.com/fyBUF1mnmI— Office for National Statistics (ONS) (@ONS) April 22, 2022
Food store sales volumes slid 1.1% in March and have fallen each month since November 2021.
Economists had expected a 0.3% decline in sales month-on-month while the ONS also downwardly revised February's fall in retail sales.
“Retailers are themselves squeezed between rising costs of operations, exacerbated by the situation in Ukraine, and weaker demand from customers. Higher global commodity prices, rising energy and transport costs, and a tight labour market, are all taking their toll. As a result, it is likely that retail prices will continue rise over the course of 2022," Helen Dickinson, chief executive of the British Retail Consortium, said.
The proportion of retail sales online continued to fall, to to 26%, its lowest proportion since February 2020 when it was 22.7%.
Myron Jobson, senior personal finance analyst at Interactive Investor, said: “Keeping a lid on spending is now a daily battle for many amid runaway inflation.
“Higher energy bills, coupled with increases in the cost of groceries and other essential services such as broadband and mobile phone tariffs, also leave less to spend on other items – reflected by a fall in non-store retailing which was the largest contribution to the fall in retail sales in March.
“Rising prices have forced many households to cut back spending on the things they want and focus on the essentials. The new era of higher inflation has only just begun and the worse is yet to come it seems, which will further impact people’s willingness and ability to fork out on anything more than the bare necessities.
UK inflation hit a 30-year high of 7% last month, adding pressure on the Bank of England to act.
Bank of England Governor Andrew Bailey said on Thursday that the British central bank was walking a tight line between tackling inflation and avoiding recession.
Read more: Three in 10 UK businesses passing on price increases to customers
Neil Birrell, chief investment officer at Premier Miton Investors, commented: “The UK retail sales data was below or near worst expectations; probably the most surprising thing was that expectations were as high as they were given the pain that consumers are feeling at present.
"With consumer confidence indicators hitting levels last seen in the 2008 recession, the Bank of England has a fine line to tread between controlling inflation, sending the consumer over the edge and the economy heading south.”
Lynda Petherick, head of retail for Accenture in the UK and Ireland, said: "Good weather usually means sunnier times for retail, and firms will hope that the summer months can play a small part in stimulating waning confidence among a general public coping with the harsh realities of rising prices everywhere they turn.
"In reality, each day brings fresh warnings from business leaders that prices will likely continue to climb, driving consumer confidence in the wrong direction for retailers."