A rise of 2.7% in inflation, the highest level in nearly four years, has had a dramatic effect on retail with sales suffering a 0.4% drop through the month of May.
The figures released by the British Retail Consortium (BRC) show that sales rose 0.2% in May, against a 1.4% in May 2016, the lowest since January, excluding Easter Bank Holiday distortions.
The report also details how Food sales increased 3.2% on a like-for-like basis over the three months to May, 4.3% on a total basis – the highest three-month growth since 2012 rising 3.2% in the quarter to May.
Over the same period, Non-Food retail sales in the UK decreased 0.3% on a like-for-like basis and increased 0.1% on a total basis, making it the worst performance recorded since may 2011.
Online sales of Non-Food products grew 7.0%, while in-store sales declined 1.8% on a Total basis and 2.3% on a like-for-like basis, below the like-for-like 12 month average decline of 2.0%.
Commenting on the figures, Helen Dickinson OBE, chief executive British Retail Consortium, said: “After the pick-up in sales over Easter, consumer spending slowed again in May resulting in almost flat growth on the previous year. Underneath the headlines, there’s continued variation in the performance of food versus non-food products, as sales performance of the two become increasingly polarised.
“Food sales, albeit positively distorted by inflation, continue to see annual growth, while in non-food categories which are predominantly capturing discretionary spending, retailers find themselves having to compete even harder.
“Overall, May’s sales slowdown is indicative of a longer term trend of a decline in consumer spending power. As household budgets become increasingly squeezed by inflation, predominantly in the non-retail part of the consumer basket, it’s vital that the next Government helps retailers keep prices low for ordinary shoppers. This means, as well as securing a tariff-free trade deal with the EU, negotiating frictionless customs arrangements; providing certainty for EU colleagues working in the UK; and ensuring the continuity of existing EU legislation as it transfers into UK law.”
Paul Martin, UK head of retail added:“After the surge in retail sales last month – the by-product of this year’s relatively late Easter – retailers have been brought back down to earth with a thump. Like-for-like retail sales contracted in May, which is likely to represent a more accurate depiction of the state of UK retail currently.
“The impact of inflationary pressures on the nation’s purse continues to play out in this month’s figures, with shoppers evidently spending more on food and drink than on non-food purchases. With inflation continuing to rise and wage growth stagnating, consumers are starting to feel the pinch – although the highly competitive nature of the UK grocery market continues to play out in the consumer’s favour.
“Many retailers, particularly fashion stores, will be poised and ready to make the most of the upcoming summer, so hopefully the weather will play fair. An increased focus on managing costs will dominate the retail agenda. More imminently though, eyes will be firmly placed on the outcome of the General Election, with close attention being paid to the implications it might have on the industry.”