Retail sales drop on high inflation; food sales slide 1.6 per cent

British retail sales by volume dropped in May as soaring inflation caused consumers to limit spending, especially on food, official data showed Friday.

Sales fell 0.5 percent compared with a rise of 0.4 percent in April, the Office for National Statistics (ONS) said.

April’s data was sharply revised lower after an initial estimate showed retail sales had jumped 1.4 percent.

“Retail sales fell in May driven by a decline in food sales,” said Heather Bovill, deputy director for surveys and economic indicators at the ONS.

“Feedback from supermarkets suggested customers were spending less on their food shop because of the rising cost of living.”

She added that department stores and companies selling household goods in May reported “consumer reluctance to spend due to affordability worries and higher prices”.

This was partly offset by higher fuel sales and purchases of summer clothing.

Inflation around the world has hit the highest levels in decades on soaring energy and food prices. In the UK, overall consumer price inflation hit a fresh 40-year high of 9.1 per cent in May, and is expected to peak at above 11 per cent in October.

Businesses are experiencing supply constraints as Covid lockdowns are lifted and following Russia’s invasion of Ukraine.

Resulting price hikes mean “consumers are increasingly making more considered decisions about how they spend their money, as the cost-of-living squeeze on finances becomes more acute”, Myron Jobson, senior personal finance analyst at Interactive Investor, noted Friday.

According to a A GfK survey published today, confidence levels among Britain’s consumers sank to a new record low this month as households struggled with the accelerating cost of living.

UK food stores saw sales volumes slide 1.6 per cent in May, the ONS added.

“Many customers are buying down, particularly with food, choosing value range items where they might previously have bought premium goods,” Helen Dickinson, chief executive of the British Retail, said.

“High value items, such as furniture and white goods, were also impacted as shoppers reconsidered major purchases during this difficult time.”

With higher operational and input costs filtering through to prices, Dickinson warned that 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, the government will need to be ready to support struggling households,” she said.

Yesterday, US bank Citi predicted that British food price inflation is set to hit 20 per cent in the first quarter of next year. Last week industry forecasters the Institute for Grocery Distribution (IGD) predicted food price inflation would peak at 15 per cent in the coming months.