Fall in retail sales as shoppers face increasing prices

Retail sales fell in May as shoppers suffered increased prices across all sectors, figures show.

The Office for National Statistics (ONS) said the quantity of goods bought between April and May fell by 1.2%, which was worse than economists had expected.

Sales volumes were up by 0.9% on a year ago, the weakest annual growth rate since April 2013.

Average store prices excluding fuel increased by 2.8% on the year, the largest growth since March 2012.

ONS senior statistician Ole Black said: "The year-on-year growth in the quantity bought for retail sales in May 2017 was at 0.9%.

"We have not seen lower growth on the year since April 2013.

"Increased retail prices across all sectors seem to be a significant factor in slowing growth."

Non-food stores were the main contributor to the slowdown after reporting an annual sales fall of 1.2%.

However, predominantly food retailers saw the lowest annual growth since July 2013 at just 0.1%.

Ian Geddes, head of retail at Deloitte, said the figures were an early indication that store prices were starting to rise and impacting on demand.

He said: "This week has seen UK inflation rise to 2.9%, the highest since June 2013.

"We are starting to see this impacting average in-store prices, which increased by 2.8%, the largest growth since March 2012, and non-food saw the biggest price rise since October 2011.

"This suggests that retailers are having to pass some of the cost pressure from the rising price of imported goods on to consumers.

"Consumers will also be feeling the squeeze in other areas of spending, including electricity and other utilities payments.

"In addition, real wage growth is now in negative territory, which will likely dampen consumer confidence in the coming months.

"With this in mind, it is likely we will see the industry renew its thinking on building customer loyalty.

"It is much cheaper to retain existing customers rather than attract new ones."

Ian Gilmartin, head of retail and wholesale at Barclays, said: "The run-up to a general election often provides a bit of a slowdown for the retail sector, with consumers less willing to commit to large purchases, but the reasons for the softer result this time are more complex.

"Inflation is really starting to kick in, with prices in the sector increasing at the highest rate for more than five years and expected to rise further.

"Coupled with lower wage growth, it's likely that consumer spending power will continue to weaken and it appears that retailers are going to have to navigate some choppy waters in the coming months."