UK retail sales take hit over inflation
British retail sales fell more sharply than expected in May, data showed yesterday, the latest sign of the growing hit to the economy from rising inflation since the Brexit vote.
Even before last week's election - which left the country without a majority government and facing political uncertainty - retail sales volumes fell 1.2pc month-on-month in May, a heavier downturn that the median forecast for a fall of 0.8pc in a Reuters poll of economists.
The fall followed an unexpectedly strong jump in April, which economists had said was likely to prove a blip.
British households have been pinched by a rise in inflation, caused in large part by the fall in the value of the pound since last year's referendum decision to leave the European Union, and by a slowdown in pay growth. "Increased retail prices across all sectors seem to be a significant factor in slowing growth," ONS statistician Kate Davies said about May's weaker-than-expected sales volumes. In monthly terms, sales fell across the board except for fuel. Data this week showed inflation hitting its highest level in nearly four years at 2.9pc while pay, when adjusted for inflation, fell by the most since 2014.
The dissatisfaction with living standards is widely seen as a factor behind Prime Minister Theresa May's loss of her parliamentary majority in last week's election.
The ONS said retail sales in the three months to May rose by 0.6pc, stronger than a rise of 0.2pc in the three months to April. The jump in sales in April was revised higher by the ONS yesterday. Compared with a year earlier, retail sales rose 0.9pc compared with economists' forecasts for a 1.7pc rise, the joint weakest increase since April 2013.
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British retailer DFS Furniture warned earlier yesterday that it would not meet profit expectations for the current year, blaming a dip in demand on customer uncertainty about the economic outlook and about the election. Earlier this week, credit card firm Visa said British consumers cut their spending for the first time in nearly four years in May.
Other measures of spending published before yesterday's ONS data had suggested a slowdown in spending too. The retail price deflator - a gauge of inflation in stores - edged up to 3.2pc.
Consumer spending is typically the biggest driver of British economic growth.
The Bank of England said last month it expected most of the shortfall in consumer demand this year to be offset by stronger exports and business investment, but many private-sector forecasters are doubtful. (Reuters)