There’s a growing weight of evidence that the UK economy is slowing down. Recent jobs data showed employers are becoming increasingly cautious about hiring plans, and slowing house price growth suggests underlying concern among homeowners.
Add to that today’s contraction in retail sales during May and we have an economy that is showing signs of weakness on all fronts.
May retail sales fell 2.7%, well below economists’ estimates of a contraction 0.5% as shoppers tightened their belts amid economic uncertainity and poor weather.
“Cracks in consumer spending may finally be starting to appear – retail sales volumes came in much worse than expected in May,” said Wealth Club’s Charlie Huggins.
“The sales decline was broad based with every category seeing weakness and online spending also falling.
“Food sales were especially weak, giving up all their gains in April, and a bit more. Clothing also had another weak month suggesting that consumers may be cutting back on discretionary purchases.”
There are a number of factors at play in May’s reading. The weather is a major consideration, and increasing prices will also have an impact. However, as with all economic data, we will need to see further reading to gauge whether May’s decline was a blip or the start of a wider trend.
“That moment of jeopardy at the supermarket till is back, even if food inflation isn’t anywhere near as hot as it was in 2023. Rising prices are making people think carefully once again about how much they are putting in their baskets,” said Danni Hewson, AJ Bell head of financial analysis.
“The weather is also playing its part. It’s hard to remember that couple of gloomy weeks in May when the UK is enjoying its current sweltering temperatures, but the drizzle forced people to alter bank holiday plans, and many had already splurged on their summer wardrobes and garden furniture to take advantage of April’s record-breaking sunshine.
“The current spell of good weather bodes well for this weekend’s food shop but worries about rising petrol prices may force people to reconsider that extra pack of burgers or that case of sparkling wine.”