Consumer spending has been slowed by the UK’s rising cost of living and last month’s record spike in household energy bills. In April, total retail sales in the UK decreased by 0.3% as economic conditions worsened for consumers.
The British Retail Consortium pointed to reduction in the sales of items such as electronics, furniture, and homewares as one of the main reasons for the decline in the retail spending headline figure.
Russ Mould, Investment Director, AJ Bell said, “The latest BRC-KPMG Retail Sales Monitor shows what everyone has been thinking – that the rising cost of living would force people to cut back on their spending. Big ticket items like furniture and electrical goods have been the first place to suffer as it’s pretty easy to decide not to spend £1,000 on a new sofa when money is tight.”
The reduction in total sales in the month of April reflected the overall slump in expenditure, compared to a three-month average growth rate of 3.2% and a 12-month rate of 6.4%, according British Retail Consortium.
“The rising cost of living has crushed consumer confidence and put the brakes on consumer spending. Sales growth has been slowing since January, though the real extent of this decline has been masked by rising inflation. Big-ticket items have been hit hardest, as consumers reigned in spending on furniture, electricals and other homeware; compounded by delays on goods coming from China,” said BRC Chief Executive Helen Dickinson.
However, due to a tiny fall in gas usage, expenditure on basics climbed by a fraction less than in March, indicating that UK consumers are looking for ways to save money on fuel and groceries according to Barclaycard.
In April, average utility spending per customer increased 28.8%, while Barclaycard reported that 9 out of 10 customers were concerned about the impact of growing home costs on their finances.
Food sales declined 1.3% in the three months to April, according to the BRC, compared to a 12-month average growth rate of 0.7%.
“With interest rates and inflation rising and the Bank of England warning of a possible recession, the squeeze on disposable household income is starting to have an impact on the high street,” said Paul Martin, UK Head of Retail, KPMG.
BRC also added that the April heatwave boosted sales of fashion and garden goods, as well as clothing for special occasions like weddings.
However, even though clothing and footwear sales increased, consumers cut back on non-essential purchases, with technology and home goods bearing the brunt of the reduction.
The Bank of England has warned of mounting danger of a recession, with inflation on course to peak above 10% later this year.
“A decent bout of weather in April helped to keep some sales ticking over, such as garden goods and new clothes to wear out in the sun. But even these treats could fall foul of the cost-of-living squeeze in time.”
“The outlook for retailers is bleak and they either have to cut prices to keep volumes ticking over, which will hurt profit margins; or they hunker down and accept that life will be hard near-term and so it’s all about keeping a lid on costs.”
