Retail sales volumes in Great Britain dropped 0.3% month-on-month in March, excluding automotive fuels, according to official figures which signal consumer caution amid the cost of living crisis.
Including automotive fuel, retail sales volumes were flat in March. Economists polled by Reuters had, overall, expected a 0.3% month-on-month rise in retail sales volumes on this measure.
The seasonally adjusted figures published yesterday by the Office for National Statistics showed that, comparing the first quarter with the final three months of last year, overall retail sales volumes were up by 1.9%.
The ONS observed that this followed “low sales volumes over the Christmas period for retailers”.
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Comparing the first quarter with the opening three months of last year, retail sales volumes were up 0.4%.
Danni Hewson, head of financial analysis at stockbroker AJ Bell, said: “Households have become more switched on to their personal finances over the past couple of years as the cost of living crisis stretched budgets to the limit. Inflation may have cooled significantly and the first of those national insurance cuts has made it into workers’ pay packets, but people are still feeling the pinch.”
There was considerable variation in the performance of different retail sub-sectors in March.
Grocery was weak, with food store sales volumes down 0.7% month-on-month. The non-store retail category, which takes in online shopping, showed a 1.5% fall in sales volumes between February and March.
Automotive fuel sales volumes jumped by 3.2% month-on-month. And, in the non-food stores category, sales volumes rose by 0.5%.
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Lisa Hooker, leader of industry for consumer markets at accountancy firm PwC, said: “What is clear is that the first quarter of the year has been disappointing for many retailers. Lower inflation and the first [two percentage point] cut to national insurance which was felt in January’s pay packets has yet to translate into a sustained recovery in spending.”
Ms Hooker added: “Grocery fell back slightly. While supermarkets benefited from the earlier Easter, the slighter warmer weather and additional bank holidays encouraged more consumers back to hospitality with stronger restaurant and pub performance. Easter chocolate sales were subdued with the impact of chocolate price inflation… “Online penetration was also flat, with the wet weather easing and more shoppers venturing back to high streets and covered shopping centres, with higher footfall over the bank holiday weekend.”
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However, she flagged her belief that “March’s retail sales figures should always be taken with a pinch of salt, as the ONS attempts to adjust for the impact of an earlier Easter”.
And Ms Hooker added: “Going forward, we are optimistic that the picture will improve from April onwards, particularly if inflation hits the Bank of England’s 2% target as many economists predict. The psychological impact of that, combined with rises in [the] national living wage, state pension and benefits, plus the second cut in national insurance, might provide weary consumers with the fillip they need to start spending again, after a decidedly slow start to 2024.”
Andrew Goodwin, senior economic adviser to the EY ITEM Club think-tank, said: “Sales grew by 1.9% in Q1, after a 1% fall in Q4 2023. Retail sales data is notoriously volatile, and noise undoubtedly exaggerates the extent to which the performance of the retail sector has improved in Q1. That said, the EY ITEM Club thinks we are clearly past the trough in terms of consumer demand and activity more broadly, with the benefits of the significant fall in inflation and recovery in real wages beginning to emerge.”
He added: ““Retail sales volumes were flat in March, after gains in the two previous months. Fortunes varied significantly across different sectors, with food sales falling back and a substantial month-on-month decline in the non-store sub-sector, but there were large gains for non-food and, in particular, fuel sales.”
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