Retail sales dropped more than expected last month, as rising inflation begins to take its toll on the economy.
The Office for National Statistics’ (ONS) latest Retail Sales Monitor has revealed that during May retail sales volumes fell 1.2 per cent month-on-month, considerably below the 0.8 per cent dip forecast by economists. This reinforces speculation that April’s spike in sales was an anomaly.
Compared to 2016, May retail sales dipped 0.9 per cent, coming below predictions of 1.7 per cent and marking the slowest growth in four years.
Meanwhile, store prices shot up 2.8 per cent — the steepest rise in half a decade.
The decline was largely driven by sales in non-food stores dropping 1.2 per cent year-on-year.
Although food stores saw a marginal growth of 0.1 per cent, this was the slowest growth since 2013.
“The year-on-year growth in the quantity bought for retail sales in May 2017 was at 0.9 per cent. We have not seen lower growth on the year since April 2013,” ONS senior statistician Ole Black said.
“Increased retail prices across all sectors seem to be a significant factor in slowing growth.”
Retail consultancy firm Ecommera’s head of insight Alex Hamilton added: “This income squeeze will only be compounded by reduced consumer confidence following the indecisive election result and as Brexit talks get underway.
“The recent good weather provides a slither of hope and retailers, particularly fashion, will be hopeful that its continuance will get people spending.
“But any boost to sales will likely be short-lived – against a longer-term trend of declining consumer spending power – and doesn’t address the structural concerns rooted in the sector.”