UK Retail Sales Drop in March as Inflation Hits Consumers

Gladys Abbott
April 21, 2017

At the same time average store prices were up 3.3% compared to the same period a year ago, the largest growth since March 2012 - led by petrol stations.

The strong recovery on Britain's high streets after last year's Brexit vote appears to be over, with retail sales figures for the first quarter showing the biggest drop in purchases in the last seven years.

The broader official measure of consumer prices is also rising strongly, led by rising energy costs and exacerbated by the pound's fall following last June's vote for Brexit.

Reports from retailers themselves have been mixed.

The volume of sales fell by 1.8 per cent during the month while store prices grew by 3.3 per cent, the fastest rate of growth since March 2012, according to the Office for National Statistics (ONS).

Kate Davies, senior statistician at the ONS, said prices were rising across the board.

Receipts from the sale of building materials increased by 9 per cent year on year.

In March alone, retail sales including automotive fuel decreased 1.8%, reversing a 1.7% rise in February.

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James Brooke, chief executive of Amplience, said: "Today's figures will be harsh a wake-up call for many retailers".

But the value of fuel sales at service stations went up by 4.6 per cent, attributed to a 14.8 per cent increase in the price of fuel.

Scotiabank's Alan Clarke said: "Slower wage inflation, coupled with slower consumer spending growth are two of the three swing factors that the MPC minutes told us would have an influence on monetary policy".

Ruth Gregory, UK economist at Capital Economics, added the slowdown retail sales suggested the consumer spending slowdown was gathering pace and added to other evidence indicating that the economic recovery has slowed since the end of previous year. "It is not surprising to see consumers reining in their spending".

'Inflation has caught up with pay growth, so real incomes of workers are no longer rising. "For example, the Bank of England's agents' score of consumer services turnover has held steady at a fairly high level", she said.

Clothing and footwear fell 0.9 per cent, sales of household goods were unchanged and a category that includes everything from floor coverings to jewelry plunged 7.7 per cent. Food sales fell 0.5 per cent.

Volumes in non-food stores declined by 1.3 per cent and in non-specialised stores, including household goods vendors, by 2.4 per cent. These were offset to some extent by internet sales, it added. However, quarter-on-quarter sales have declined throughout 2017.

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