Retail sales drop as consumers focus on essential items

Retail sales fell for the first time in seven months in March as consumers reserved spending for essential items in light of rising inflation.

Data from the British Retail Consortium (BRC) and KPMG showed that like-for-like UK retail sales fell by 1% in March compared with a year earlier, while total sales dropped 0.2%, marking the first decline since August last year.

Paul Martin, UK head of retail at KPMG, said March proved to be a "disappointing end" to the first quarter for retailers.

"Food sales remained in the black for a full quarter, although this is largely being driven by rising inflation, so no reason for too much celebration."

The biggest drag came from non-food retail sales, which fell 1.1% on a like-for-like basis and 0.8% in total terms in the three months to March.

Like-for-like food sales in the the three months to March decreased by 0.2% but jumped 1.2% on a total basis.

BRC chief executive Helen Dickinson said: "Food sales continue to outperform non-food sales as shoppers focus their spending on essential items. This marginal growth in food was bolstered by slightly higher shop prices following increases in global food commodity costs and a weaker pound."

The pound has fallen by more than 17% against the US dollar and 10% against the euro since the Brexit referendum, increasing the cost of imports.

"The pressure on prices continues to build, albeit slowly, and will inevitably put a tighter squeeze on disposable income and so to ensure consumers continue to enjoy great quality, choice and value on goods, securing tariff-free trade must be the priority as the Brexit negotiations begin in earnest," Ms Dickinson added.

Some good news came from online non-food sales which grew 7.4% over the three months to March, although in-store sales dropped 3% in total terms, and like-for-like sales fell 3.4%.

Separate figures from Barclaycard showed that the higher cost of everyday goods like petrol and groceries pushed overall spending the first three months of the year up by 4.3%, the second largest rise since the second quarter of 2015.

In March alone, consumer spending jumped 4.6% year-on-year, thanks not only to higher prices, but a jump in leisure expenditure, Barclaycard said.

Entertainment spending rose 11.6% last month, while travel increased 6.3% and hotels jumped 12.3%.

However, the report also showed that 52% of Britons are more worried about the cost of everyday items than they were last year, and 74% said those worries were brought on by the rising cost of their weekly shop.

Barclaycard managing director Paul Lockstone said: "Consumers remain fully aware of the potential impact of inflation on their household budgets.

"We see a significant proportion planning to go to greater lengths to seek out value in their everyday purchases, and it will be interesting to see the impact of this behaviour on the economic landscape."