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UK retail sales slump as inflation rises, spending shifts - CBI

UK retail sales slump as inflation rises, spending shifts - CBI
UK retail sales slump as inflation rises, spending shifts - CBI Copyright Thomson Reuters 2022
Copyright Thomson Reuters 2022
By Reuters
Published on Updated
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By David Milliken

LONDON - British retail sales slumped in April with the first year-on-year fall in volumes in 13 months, reflecting a cost-of-living squeeze and changed spending patterns, figures from the Confederation of British Industry showed on Wednesday.

The CBI's headline retail sales balance fell to -35 in April from +9 in March, well below the average -3 expected in a Reuters poll of economists. Some 63% of stores reported that sales volumes fell, compared with 28% who experienced a rise.

The data compares sales with April 2021 when many non-essential shops had a surge in sales as they reopened after COVID restrictions, while other venues such as pubs and restaurants remained closed.

However, even adjusting for seasonal effects, retail demand was weak this month as sales for the time of year fell to -24 from March's -23.

"Rapid inflation means that the cost-of-living crisis is going nowhere soon," CBI economist Martin Sartorius said.

"Retail sales were below seasonal norms in April as consumer spending continued to shift back towards services and rising prices impacted households' spending power," he added.

Consumer price inflation hit a 30-year high of 7.0% in March and is forecast to be even higher this month, as a 50% rise in regulated household energy tariffs kicks in.

Pay is not keeping up. Employers offered an average 4% annual pay rise this month, and consumer confidence is its lowest since the 2008 financial crisis.

Other data and surveys have suggested that richer households - many of whom built up savings during the pandemic - are spending more on services such as travel and eating out, and less on consumer goods, than they did last year.

However, forecasts that growth will only slow moderately hinge on households drawing down on savings much more than they have so far, Gabriella Dickens, an economist with consultancy Pantheon Economics, said.

"Looking ahead, we expect retail sales to edge down over the remainder of the year."

Previously published official data for March showed retail sales volumes excluding fuel were 0.9% lower than a year earlier.

The combination of surging inflation and slowing demand is adding to the challenge facing the Bank of England which is expected to raise interest rates for a fourth straight meeting on May 5.

The CBI carried out its survey between March 25 and April 13, and had responses from 51 retail chains.

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