Retail sales retreat from Easter highs as rising prices cloud sector's outlook

 
Jasper Jolly
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Retailers reported flat sales growth (Source: Getty)

Retail sales growth slowed in May, according to a survey of big British retailers, as rising prices start to threaten the sector.

The balance of firms reporting an increase in sales fell back to only two per cent, according to the Confederation of British Industry (CBI), after the unusual timing of Easter pushed up April figures to a big 38 per cent positive balance.

While a fall back from elevated levels was expected, the scale of the retreat alarmed economists, who had predicted a balance of 10 per cent reporting growth.

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Retail sales rose by 2.3 per cent in April, according to the Office for National Statistics, surprising economists, but the longer-term growth trend for the sector remains weak.

Alpesh Paleja, CBI principal economist, said: “It’s clear that households are increasingly feeling the pinch, as rising inflation pushes down on real earnings.”

The UK consumer price index of inflation rose by 2.7 per cent in April, meaning real wages fell for the first time in three years.

Average selling prices rose at the fastest pace in six years in the year to May, with a balance of 62 per cent of firms reporting increases.

Read more: Quarterly UK retail sales fall biggest since 2010: What the experts said

The squeeze on Britons’ spending power has led to a darker outlook for the UK’s retail sector. Overall the firms, which account for a third of British retail employees, expect the business situation to worsen in the next quarter, with the weakest sentiment since the start of 2012.

The survey also showed internet sales growth also falling below long-run averages, while orders to suppliers fell.

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