UK retail sales slump in March as inflation spirals

UK retail sales fell by more than expected in March as surging inflation hit demand for food and petrol, according to official data released on Friday.

Retail sales volumes fell by 1.4% last month compared with February, the Office for National Statistics said, worse than expectations for a 0.3% monthly drop.

Sales of food and petrol, where prices have spiralled in recent months, fell sharply, the ONS said. Online retail sales, which boomed during Covid pandemic lockdowns, also fell, it added.

Food store sales volumes fell by 1.1% in March and have fallen each month since November 2021. 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", the ONS said

Automotive fuel sales volumes fell by 3.8% "with other data sources indicating that some non-essential road travel had been reduced following record high petrol and diesel prices".

The data came as a widely-watched survey showed consumer confidence slumping as the cost of living crisis bites. The GfK survey plunged seven points to -38, a near-record low, with shoppers expressing more concern about the outlook for the wider economy than they did in the aftermath of the 2008 financial crash.

The lowest score since the index began in 1974 was -39 in July 2008 at the peak of the financial crisis caused by misconduct in the banking sector.

"In cutting back on their spending, consumers will also have had one eye on the upcoming surge in energy bills, as well as other price rises, which will have hit their wallets in April," said CMC Markets chief analyst Michael Hewson.

"We also can’t forget to mention the fiscal own goal of the Chancellor of the Exchequer (finance minister) Rishi Sunak in going through with his National Insurance tax hikes, against a chorus of voices urging him to defer them. He can’t say he wasn’t warned."

"However this is spun, this consumer slowdown is very much one of the government’s own makings and is likely to make for a difficult summer for business and consumers alike."

Hewson said Friday's figures would also factor into debate among Bank of England policymakers over whether to raise interest rates next month by 50 or 25 basis points.