Retail sales fall as shoppers cut back on food

British households will be on average £2,320 worse off this year as wages fail to keep pace with rising energy and fuel costs, representing the biggest fall in living standards since records began.

UK shoppers cut back on food spending last month, adding to concerns that the economy is heading for an inflation-induced recession later this year.

Retail sales fell by 0.5 per cent between April and May and by 0.7 per cent when fuel is excluded, according to data from the Office for National Statistics (ONS). Sales dropped by 2.8 per cent compared with the same month last year.

The ONS also revised down April’s increase in spending from 1.4 per cent to 0.4 per cent, pointing to a marked cutback from shoppers in the face of biting food and energy price inflation.

The biggest drop in spending was on food in May, when supermarket sales dropped 1.6 per cent. Grocery prices have been driven higher by rising energy costs, global grain shortages and supply chain disruptions. Spending on household goods also dropped sharply but non-food retail sales stayed flat on the month and clothing sales grew 2.2 per cent.

Retail sales have been gradually falling as consumer sentiment has hit its lowest on record with households battling the squeeze from inflation at a 40-year high and falling real incomes. Economists widely expect the economy to have contracted in the second quarter, paving the way for a potential recession in the second half of the year.

Inflation hit 9.1 per cent in May and is on course to reach double digits this autumn. Pay growth has consistently lagged behind rising prices and has led to demands for higher public sector wages.

Retail sales have declined 1.3 per cent in the past three months and been on a gradually falling trend since last summer when many lockdown restrictions were partly lifted.

Heather Bovill, deputy director for surveys at the ONS, said that the cost of living crisis was eating into household budgets. “Feedback from supermarkets suggested customers were spending less on their food shop, because of the rising cost of living,” she said.

Department stores also said there was a “consumer reluctance to spend due to affordability worries and higher prices”, she added. “The proportion of online sales slipped back in May but remain substantially higher than before the pandemic.”

Lynda Petherick, retail lead at Accenture, said: “Today’s slight drop in sales won’t come as a surprise to a sector contending with rapidly rising costs, as well as pressure to keep prices low for struggling households.

“Inflation remains a key issue for retail businesses, who are having to grapple with growing supply chain costs, as well as keeping their stores afloat and staff well compensated. For consumers, rising costs for staple goods mean many don’t have excess money to spend on discretionary items.”

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Retail sales fall as shoppers cut back on food