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Slump in UK retail sales

There was a surprising fall of 1.4% in retail sales in May. There had been a rise of 1.1% in April, but the Office for National Statistics put that down to a combination of the royal wedding and the number of Bank holidays added to the fine weather.

More money going into the tank has meant less spent in the shops.

But, the fall during May was the steepest since January 2010, and could well continue. Food sales were hit really hard last month, falling by 3.2% by value and 3.7% by volume, which was the biggest monthly decline since June 2008. There was also a decline in non-food sales of 0.8%.

In a sense this was not totally unexpected, as Tesco recently reported that sales were fairly flat. This is mainly down to high fuel costs, with food and fuel now taking up over half of household spending.

Consumers are also being forced to cope with a fall in disposable income as a result of inflation continuing at 4.5% whilst earnings were only increasing by 1.8% according to the latest figures. Capital Economics forecasts that consumer spending will drop by 1% this year.

Given that consumer spending makes up about two-thirds of GDP, this will also weigh heavily on economic growth.

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Posted in Consumer Expenditure, Retailing

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