Annual retail sales growth slowest since April 2013 as price pressure continues

 
Jasper Jolly
Follow Jasper
BRITAIN-INFLATION-RETAIL
British consumers are facing rising inflation (Source: Getty)

Retail sales over the past year cooled to the slowest pace of growth since April 2013, as rising prices drag on the growth-boosting British consumer.

Sales volumes grew by a four-year-low of 0.9 per cent in May compared to the same month last year, according to the Office for National Statistics (ONS).

Non-food retailers were the biggest driver of the slowdown, while grocers saw the lowest annual sales growth since July 2013.

Read more: Retail sales slide as consumers cut discretionary spending

Over the course of May the quantity of items bought fell by 1.2 per cent after a strong previous month, although the underlying quarter-on-quarter pattern – an important indicator in volatile data – showed a slightly healthier picture, with 0.6 per cent growth.

Ole Black, ONS senior statistician, said: “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.”

Economists have been watching retail sales closely for signs of a slowdown in consumer spending as rising prices eat into the pound in Britons’ pocket.

Consumption was one of the key drivers of the UK economy’s surprise strength in the year since the referendum, prompting hasty growth revisions to forecasts from the Bank of England and other prominent economists.

However, expansion in the UK economy cooled at the start of 2017 to its slowest rate in a year, with indications for the current quarter showing little scope for a big rebound.

Read more: High street sales falter in May as retailers struggle against online surge

Howard Archer, chief economic advisor to the EY Item Club, said: “There is some support for consumer spending coming from current decent employment growth. However, it is questionable if this can continue in the face of weakened UK economic activity, increasing business uncertainty, and concerns over the UK’s outlook.”

Inflation hit an annual rate of 2.9 per cent in May, with concerns growing on how long the British consumer can continue to support the UK economy as price growth overtakes wages.

In March retail sales fell sharply, with the first quarterly decline since the end of 2013. The ONS pointed to price increases as the source of that dramatic fall, although the data may have been affected by the late Easter holiday, which distorted monthly spending patterns.

In April sales bounced back, with good weather boosting the quarterly sales growth trend back into positive territory of 0.3 per cent growth.

Sterling weakened against the US dollar, with the pound down by more than 0.35 per cent on the day ahead of the Bank of England's latest monetary policy decision. The pound fell below $1.27 in morning trading, down from $1.276 at midnight.

Related articles