Retail sales in the UK have slumped in April as hard-pressed households reined in their spending amid the soaring cost of living, according to an industry snapshot.
The figures from the Confederation of British Industry (CBI) found retailers experienced a rapid decline in sales volumes, in a month when consumers faced soaring gas and electricity bills, record fuel prices and a sharp increase in the cost of the weekly shop.
In a sign that the worst squeeze for household disposable income since the 1950s is starting to affect consumer spending, the data showed a particularly sharp fall for clothing and specialist food and drink shops.
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Motor traders said sales were poor in April, having been good in March, while retailers warned that sales volumes were likely to continue declining in May, albeit at a more modest pace.
Compiled from a survey of 108 companies, including 51 retailers, in the weeks immediately after Rishi Sunak’s spring statement, the CBI survey showed that sales volumes were considered to be poor for the time of year in April.
The headline retail sales balance on the lobby group’s distributive trades survey fell to -35 in April from +9 in March, significantly below the average of -3 expected in a Reuters poll of economists.
The CBI said some of the drop in sales reflected consumers switching back to spending more on services – such as eating out in pubs and restaurants and travelling on holiday – after the easing of Covid restrictions. Retail sales had soared in lockdown while other opportunities to spend were limited.
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However, it also warned that soaring prices were hitting consumers’ spending power. Households faced a record energy bill increase of 54% at the start of April, in a month when petrol and diesel rose to a record high amid the war in Ukraine and as the government increased taxes on workers.
“It follows a sharp drop in March, and suggests the current decline in real incomes, due to the jump in inflation and the higher tax burden, will weigh on retail sales,” said Gabriella Dickens, a senior UK economist at the consultancy Pantheon Macroeconomics.
Annual inflation reached 7% in March, the highest rate since 1992. Economists have warned that inflation, which acts as a gauge for the rising cost of living, could hit 10% this year. Martin Sartorius, an economist at the CBI, said high inflation meant the cost of living crisis was going nowhere soon.
“To combat these challenges, the government will need to keep a close eye on support for vulnerable households and businesses struggling with higher energy prices. Meanwhile, going for growth must continue to be the government’s primary domestic focus, as increasing productivity growth is the only sustainable route to raise living standards,” he said.