UK retail sales slump to 7 year low

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UK retail sales posted their biggest quarterly fall in seven years in March, as the prices of everyday goods continued to climb.

The official data from the Office of National Statistics published today showed sales were down 1.4 per cent on the preceding quarter, and down 1.8 per cent compared with February 2017.

In the quarter, sales volumes fell in all types of shop except those selling textiles, clothing and footwear.

But the total amount spent was still higher than a year ago.

Kate Davies, senior statistician at the ONS, said: “This is the first time we’ve seen a quarterly decline since 2013, and it seems to be a consequence of price increases across a whole range of sectors.”

The ONS said average store prices had increased by 3.3 per cent on the year, the highest growth since March 2012.

The largest contribution came from petrol stations, where prices were up by some 16.4 per cent on the year.

Euan Murray, Relationship Director,Barclays Corporate Banking, Scotland, said: “A difficult month for retailers in March, with the impact of price rises taking a bite out of consumers’ willingness to part with their cash. Fuel was once a gain a major contributor to inflation in the sector, but accelerating price increases across the board appear to be having an influence on spending decisions.

“This is no surprise, as retailers contend with significant cost increases in their supply chains it is inevitable that some of this will have to be passed on to their customers. Calculating how willing the public are to accept higher prices will be crucial over the next few months, with retailers attempting to balance the need to protect their margins at the same time as retaining footfall.

“It’s important not to overstate the severity of the figures, as the sector was still able to post monthly year-on-year growth and there were other bright spots, with clothing retailers posting good results boosted by a milder than usual March. The late Easter this year may also have slightly disrupted sales patterns, but the overall trend does suggest that it’s going to be a tricky time for the wider industry as we move towards the summer season.”

Martin Beck, senior economic advisor to the EY ITEM Club, said: “March’s weakness was broad-based, with department stores the only major sector to see sales volumes increase on the previous month. The likely culprit for this weakness remained a familiar one – rising shop price inflation. This reached 3.3 per cent year on year in March, a pace not matched since March 2012.

“With the retail sector accounting for around 5 per cent of GDP, Q1’s decline in sales will have shaved close to 0.1 percentage points off GDP growth in that period. Combined with a poor set of macro data from other sectors, growth looks likely to have slowed from 0.7 per cent in Q4 2016 to around 0.4-0.5 per cent.

Looking ahead, the boost to the tradable sector from the weak pound and a buoyant world economy should mitigate weakness on the consumer side. But the dominance of the latter in the economy means that a shift in the source of growth is likely to come at the price of a further slowdown in the pace of expansion.”

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