Retail sales saw a dramatic fall of 1.4% in March as inflation spiked to record levels of 7%, according to the latest figures from the Office of National Statistics (ONS).
The largest contributor to the decline was non-store retailing, with sales dropping 7.9% over the month after a 6.9% decline in February.
The ONS said that food store sales fell 1.1% in March, marking the sixth consecutive month of plummeting sales across the sector, with more consumers choosing to eat out as Covid-19 restrictions eased, alongside the rising cost of food eating into customer wallets.
However, non-food store sales volumes increased 1.3%, due to growth in non-food stores of 2.9% and household goods stores such as DIY outlets benefiting from a 2.6% boost in sales.
Petrol and diesel sales fell 3.8%, as data suggested that non-essential car travel was reduced on the back of higher fuel costs.
“When energy bills are shooting up, it costs considerably more to fill up your car with petrol and buying essentials like a loaf of bread and a pint of milk has become more expensive, it’s no wonder that retail sales have plunged,” said AJ Bell investment director Russ Mould.
However, the rising tide of people dining out again as consumers embraced post-Covid socialising had given pubs and restaurants reason to hope for good news.
“Pubs will be also watching the trends closely as while beer drinkers may be less willing to trade down to cheaper products, there is still the question of getting them through the door in the first place,” said Mould.
“More people returning to working from the office theoretically increases the chances of pubs enjoying a tick-up in sales thanks to people socialising once their shift is over.”
Mould caveated the shining potential of post-work dining sales with the gloomy reality of spiking inflation rates, which might dampen consumer appetites for after-work happy hour drinks, commenting, “[that] post-work pint may have to become a less frequent treat if inflation keeps ticking up.”
Online retail sales tumbled 26% as more consumers ventured into physical stores again in the post-Covid era, with online shopping bidding farewell to its heyday of lockdown gains as the high street reopened for customers.
The high street’s trajectory unfortunately looks set to fall in line with online shopping, once the higher energy bills and household expenses burn through consumer budgets.
“The ONS’ retail sales data is a wake-up call that life is going to be tough for shops – virtual or physical – in the coming months,” said Mould.
“Once those vastly increased energy bills hit the doormat and households take time to reassess their financial situation, there is every chance that retail sales could get even worse.”
Unessential items have already taken a hit, with luxury and slightly whimsical purchases on the decline as higher-end companies saw their shares take a dip over the past few months of tightened consumer belts.
“The share price movements tell you what the market thinks about the consumer spending outlook,” said Mould.
“It’s easy to cut back on items like greetings cards and clothes, as evidenced by big declines in the shares of Moonpig and Marks & Spencer.”
