Signs of recovery despite huge drops in retail sales, consumer spending

Separates figures released today have shown sharp falls in retail sales and consumer spending in May, yet the data has also presented encouraging signs of recovery in the retail sector.

Consumer spending has contracted 26.7 percent year-on-year in May, according to Barclaycard report and retail sales on a total basis decreased by 5.9 percent, against a decrease of 1.9 percent in May 2019, as per the figures from the British Retail Consortium (BRC).

In a major positive for the grocery retail, the Barclaycard report has shown increased spending on essential items, as warm weather and the VE Day bank holiday drove supermarket growth, with specialist food and drink outlets seeing the biggest increase since restrictions began.

Spending on essential items grew slightly by 0.9 percent, bolstered by a 24.5 percent rise in supermarket spend – which increased to 27 percent in the week preceding the VE Day weekend. The upsurge in supermarket expenditure has also helped to offset a 49.7 percent fall in fuel.

The category including greengrocers and independent convenience stores continues to attract consumer loyalty, with the sector seeing a growth of 42.5 percent – the highest increase since restrictions were introduced.

While non-essential spending fell 36.9 percent year-on-year, the decline was less severe than last month which saw a fall of 47.7 percent, the report noted. The signs of recovery have also been visible in eating and drinking sector, with smaller fall in spending as more restaurants, pubs and cafes now offer delivery and takeaway services.

“We are seeing certain sectors start to increase sales as the climate eases and they adapt. It may take some time to recover from the economic impact of coronavirus but household confidence remains high and there is a strong desire among consumers to support businesses,” commented Esme Harwood, director at Barclaycard.

The BRC figures for May are a considerable improvement from the record 19.1 percent drop in April, but still the second-biggest since the survey started in 1995.

Over the three months to May, which have been affected by the coronavirus crisis, BRC said the food sales have increased 5.6 percent on a total basis, much higher than the 12-month average growth of 2.1 percent.

Paul Martin, UK head of retail at KPMG, commented that the clear divides between essential and non-essential categories and online and physical retailers induced by the coronavirus crisis continue unabated.

“Sales of computing equipment, toys and other household goods remained strong – especially online – with home-working and entertainment firmly at the forefront of consumers’ minds. Food and drink also performed well; no doubt encouraged by warmer weather and May’s bank holidays,” he said.

“By contrast, many non-essential categories – especially fashion – continued to attract limited demand which will increase the pressure on them in the coming months.”