Sterling falls against the dollar as British retail sales plummet at fastest quarterly rate since 2010

 
Jasper Jolly
Consumers In The Christmas Eve Retail Rush
Retail sales fell in March (Source: Getty)

Retail sales in the UK fell at the sharpest quarterly rate for seven years in March as price increases started to weigh on the British consumer.

The volume of sales fell by 1.8 per cent during the month while store prices grew by 3.3 per cent, the fastest rate of growth since March 2012, according to the Office for National Statistics (ONS).

The fall of 1.4 per cent in the first three months of 2017 was the first quarterly decline in sales since the end of 2013, and the biggest fall since the start of 2010, when value-added tax (VAT) jumped.

Read more: Trouble in store: More pain on the way for UK retail

Retail sales had previously surprised economists by increasing by 1.7 per cent month-on-month in February. However, quarter-on-quarter sales have declined throughout 2017.

Kate Davies, ONS senior statistician 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 largest price rises came from petrol stations, which saw prices rise by 16.4 per cent year-on-year. Petrol prices have soared since oil cartel Opec (the Organization for Petroleum Exporting Countries) agreed to cut production in November.

Read more: Sterling jumps as retail sales beat expectations despite rising prices

Meanwhile the fall in sterling since the EU referendum has raised inflation to a 2.3 per cent annual rate in the UK, as imports become more expensive. Despite recent rises the pound remains around 15 per cent less valuable than its pre-referendum peak against the US dollar.

However, despite the increase in prices the value of items bought stayed flat in the quarter.

Richard Lim, chief executive at Retail Economics said: “This latest data shows that the surge in inflation is putting retailers under intense pressure with the first quarterly decline in retail sales since 2013. Families are facing the fastest rise in living costs for over three years and they are reining in their spending rapidly."

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The fall in sterling has positively impacted retailers with significant international exposure, including high-end brands catering for wealthy tourists and retailers using international-facing platforms, such as eBay and Amazon. However, the domestic market is showing signs of worrying weakness.

Jeremy Cook, chief economist at World First, said: “We used to think that when the going got tough, the Brits went shopping, but this retail environment is too much for the hardy British consumer."

The pound fell to lows of $1.2781 against the US dollar in morning trading after the data were released, after earlier trading well above $1.28.