UK Consumers Emerging From Lockdown Spend On Food Causing Dip In UK Retail Sales

According to official data form the United Kingdom, there was an unexpected drop in retail sales in the country in May as people came out of their homes after the lifting of lockdown restrictions and were seen spending money in restaurants rather than shops.

The Office for National Statistics said that there was a 1.4 per cent drop in retail sales between April and May. Analysts were expecting the growth of retail sale volumes in the country to be around 1.6 per cent month on month for May.  

The biggest hit of the fall was for food stores as they reported a 5.7 per cent drop in sales. 

A sharp slowdown in underlying UK sales growth in its first quarter was reported by supermarket chain Tesco, Britain’s biggest retailer, in a separate report on Friday.

“Anecdotal evidence suggests the easing of hospitality restrictions had an impact on sales as people returned to eating and drinking at locations such as restaurants and bars,” the ONS said.

With the UK economy recovering from the Covid-19 pandemic, the weak retail sales data does not necessarily mean weaker consumer spending, said most economists, because a massive surge in sales has been reported by firms in the hospitality businesses in the same period which showed that consumers spent on eating and dining instead on retail segments such as clothing.

However, analysis of more recent payment card data potentially indicates that the growth in consumer spending could be slowing down already, said Samuel Tombs, at consultancy Pantheon Macroeconomics.

“Households’ real disposable income looks set to fall in Q4, as the end of the furlough scheme reduces employment and inflation rises to match wage growth,” he said.

In the weeks ahead, household spending could again be curbed because the rapid advance of the “delta” variant of Covid-19 even though Britain has been very swift in rolling out Covid-19 vaccines.

The authorities have delayed by a period of four weeks a planned end to lockdown in England that had been scheduled for Monday.

In annual terms, retail sales were 24.6 per cent higher than May last year, which was still short of the median expectation for a 29.0 per cent increase.

With a month on month growth of 9.0 per cent, household good stores bucked the wider decline which was because of households spending on outdoor goods, according to the ONS.

Earlier this week, motoring and outdoor goods store Halfords said it had been doing a roaring trade in bicycles.

(Adapted from FinancialPost.com)



Categories: Economy & Finance, Regulations & Legal, Strategy, Sustainability

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