Rolling coverage of the latest economic and financial news, as retail sales across Britain drop in May and consumer morale continues to slide
- UK consumers are gloomier than at height of pandemic or in 2008 financial crisis
- Retail sales fall as people cut back on food shopping
- UK economy ‘running on empty’ as post-pandemic order books dry up
- Takeover of UK defence supplier Ultra Electronics set to be approved
The cost of living crisis bit harder last month, says Nicholas Farr, assistant economist at Capital Economics:
The 0.5% m/m drop in retail sales volumes in May (consensus -0.7% m/m) was the third decline in four months, follows a downwardly revised rise in April and suggests that the fall in real incomes from higher inflation is starting to hit consumer spending harder.
More pain probably lies in store for the retail sector over the coming months, but that won’t stop the Bank of England from raising interest rates further.
“It’s unsurprising that consumer confidence is so low; amidst a further rise in inflation, poor performance of the FTSE, supply chain uncertainty and a looming recession, it seems retailers are struggling to elicit anything other than unavoidable spending, such as on food, with holiday fashion the only notable exception. For me, ASDA’s chairman Stuart Rose sums up current consumer sentiment best – sharing how shoppers are now setting £30 spending limits at the tills, down further still from the £40 limits cited by Tesco’s chairman John Allan just a month ago.
“Sadly, whilst retailers will be looking hopefully to a bumper set of results next month, there is little sign of a turnaround, as retailers face the added pressure on supply chains, driven by Covid pressures in China, rail strikes in the Uk and the ongoing Ukraine conflict, coupled with reduced footfall on the highstreet. Whilst we would hope for an uplift, with inflation showing no sign of reducing, retailers will likely be concerned that this trend might continue throughout the entire summer season.”
