Cost of living squeeze hits retail sales

UK retail sales struggled in April, industry research showed on Wednesday, as the cost of living crisis saw consumers rein in spending.

According to the latest CBI Distributive Trades Survey, sales volumes tumbled by far more than expected, to -35 in the year to April compared to 9 a month previously. Analysts had been looking for a balance of around -5.

The first fall since March 2021, when the UK was in lockdown, respondents said volumes were expected to continue falling in May, with a balance of -17.

Retail sales were seen as poor for the time of year, with a balance of -24 in April compared to -23 in March, while orders placed with suppliers was also down, at -7 compared to 3 in March. Internet sales volumes continued to fall in the year to April, at -36, though at a slower pace than in March, when the balance was -46.

Martin Sartorius, principle economist at the Confederation of British Industry, said: “Retail sales were below seasonal norms in April, as consumer spending power continued to shift back towards services and rising prices impacted households spending power.

“Rapid inflation means that the cost of the living crisis is going nowhere soon.”

Gabriella Dickens, senior economist at Pantheon Macroeconomics, said: “Consumers now appear to be tightening their belts as the squeeze on households’ real disposable income intensifies.

“True, the sharp drop in the reported sales balance reflects base effects; sales were boosted in April 2021, as lockdown rules started to lift and pent-up demand flower through. Nonetheless, the sales for time year balance, which is unaffected by base effects, edge down.

“Looking ahead, we expect retail sales to edge down over the remainder of the year.”

April and the Easter period is traditionally a strong one for the high street. But this year it also coincided with an 54% increase in energy bills and a rise in National Insurance contributions. Inflation is also at a 30-year high of 7%.

However, the Easter weekend fell outside the survey’s dates, with responses collected between 25 March and 13 April. A total of 108 companies responded, including 51 retailers.

A balance is the weighted difference between the number of respondents reporting an increase, and those reporting a decrease.