By Ian McConnell
Business Editor
Retail sales volumes in Great Britain tumbled 1.4% month-on-month in March, official figures show, signalling consumers are tightening their purse strings amid the mounting cost-of-living crisis.
A sharp drop in sales through online channels was the largest contributor to the overall decline in volumes last month, the seasonally adjusted data from the Office for National Statistics show.
The fall in sales volumes in February has been revised from 0.3% to a steeper 0.5%.
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Volumes in the non-store retailing category, which takes in online sales, plunged by 7.9% month-on-month in March.
Sales volumes in food stores declined by 1.1%.
The ONS said: “Higher spending in pubs and restaurants linked to reduced coronavirus restrictions, as well as the impact of rising food prices on the cost of living are possible factors for reduced spending in food stores.”
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Non-food store sales volumes rose by 1.3% in March. Sales volumes rose 2.6% across the household goods store category, which includes do-it-yourself outlets.
Russ Mould, investment director at stockbroker AJ Bell, said: “The ONS’s retail sales data [are] a wake-up call that life is going to be tough for shops – virtual or physical – in the coming months. 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.
“Big-ticket items look particularly vulnerable, including sofas and airline tickets.”
He added: “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.
“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. But that post-work pint may have to become a less frequent treat if inflation keeps ticking up.”
James Smith, developed markets economist at Dutch bank ING, highlighted the financial pressures on households as he flagged the potential for a downturn in consumer spending in coming months.
He said:“Personal finance and economic expectations for the next year are about as bad as they were during the financial crisis.
“All of this means it’s increasingly difficult to see consumer spending avoiding a downturn this summer, even if only modest by some historic standards. Fuel prices are up 11% since the start of the year, and household energy bills have increased by an average of 54% this month, with another 30% increase looking likely in October. Inflation is set to peak close to 9% in April and probably won’t fall below 7% this year.”
Annual UK consumer prices index inflation rose to a fresh 30-year high of 7% in March, from 6.2% in February, official figures showed last week.
Mr Smith said: “Whether the UK heads into a recession is still an open question. This crisis is unusual as around 8% of GDP (gross domestic product) worth of ‘excess’ household savings has been built up during the pandemic, though as is often highlighted, most of this is concentrated in higher-income earners who are less likely to be as hard-hit by higher energy prices.”
Mr Smith said ING believes the Bank of England is “more likely to hike interest rates once or twice more, before pressing the pause button over the summer”.
He added: “That suggests market expectations of six more rate hikes this year are likely to be undershot.”
The Bank’s Monetary Policy Committee has since December raised UK base rates from a record low of 0.1% to 0.75%, with three separate increases.
Retail sales volumes in Great Britain in March were 2.2% above their pre-coronavirus pandemic levels of February 2020.
The fall in online sales in March followed a 6.9% decline in February. Online sales volumes last month were nevertheless up by 20.3% on their February 2020 levels.
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