British retail sales fall for second consecutive month

British shoppers spent more money buying fewer goods from retailers in June as the pain of rising inflation hit harder.

The quantity of goods bought fell 0.1 per cent from the previous month — the second consecutive decline — but consumers ended up spending 1.3 per cent more than they did in May due to rising prices, according to official data.

The figures released on Friday by the Office for National Statistics underscored the impact on household finances of surging inflation, which hit a 40-year high of 9.4 per cent in June.

Historically growth in the volume and value of UK retail sales has been similar, but since February the difference between the two has been greater than 1 percentage point.

Sales growth volumes were revised down for previous months; as a result, recorded purchases have been declining or stalling each month since October last year. The figures do not include spending in bars and restaurants.

Heather Bovill, ONS deputy director for surveys and economic indicators, said the trend for retail sales “is one of decline”.

Food sales picked up 3.1 per cent due to the Jubilee celebrations, but that was the only sector to report an increase.

Fuel sales fell sharply, by 4.3 per cent, with retailers suggesting the drop was linked to record high petrol and diesel prices impacting demand.

Clothing purchases dipped 4.7 per cent despite the return of widespread international holiday travel and wedding season. Sales of household goods, such as furniture, fell 3.7 per cent. Retailers in both sectors suggested consumers were cutting back on spending due to higher prices and concerns about affordability.

Online sales were down 3.7 per cent. They shrank in proportion to total sales while remaining above their pre-pandemic share, suggesting that to some degree consumers have made a permanent shift to remote shopping.

Separate data published on Friday by research company GfK showed that UK consumer confidence remained at minus 41 in July, the lowest since records began in 1974.

Joe Staton, client strategy director at GfK, said that confidence was “severely depressed this month as the impact of soaring food and fuel prices and rising interest rates continues to darken the financial mood of the nation”.

The data are the latest in a series of indicators suggesting that the UK is sliding into an economic downturn.

“It’s unlikely that any category of discretionary spending will be spared by the crisis, so retailers will be buckling up for a bumpy ride in the run-up to the all important Christmas trading period,” said Lisa Hooker, industry leader for consumer markets at the consultancy PwC.

Paul Dales, economist at Capital Economics, predicted the surge in inflation would lead to a 3 per cent fall in real household disposable incomes this year and another 2 per cent decline next year. “As a result, a recession now feels inevitable,” he said.

Staton said that the next UK prime minister, either former chancellor Rishi Sunak or foreign secretary Liz Truss, will need to deliver “a much-needed shot in the economic arm of the country if they are to help improve consumer confidence”.


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