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UK retail sales fall as non-food sales hit six year low

By Oliver Haill

Date: Tuesday 06 Jun 2017

UK retail sales fall as non-food sales hit six year low

(ShareCast News) - UK retail sales decreased slightly in May, as a six-year low in non-food sales offset a strong month for supermarkets.
Sales increased by 0.4% on a like-for-like basis compared to the May last year, the retail sales monitor from the British Retail Consortium and KPMG said on Tuesday. This followed a month of growth in April.

Total sales, which includes the effect of new shop openings, rose 0.2% in May, which was the lowest since January, excluding Easter distortions.

Non-food retailers endured their worst three months since May 2011, with sales decreased 0.3% on a like-for-like basis and up 0.1% on a total basis.

On the upside, food sales were up 3.2% on a like-for-like basis and 4.3% on a total basis over the three months to May, which was the strongest since February 2012.

Online sales of non-food products grew 7.0% over three months, while in-store sales declined 2.3% on a like-for-like basis, below the like-for-like 12-month average decline of 2.0%.

Helen Dickinson, chief executive of the BRC, said May's sales slowdown is indicative of a longer term trend of a decline in consumer spending power, with household budgets increasingly squeezed by inflation, predominantly in the non-retail part of the consumer basket.

"Underneath the headlines, there's continued variation in the performance of food versus non-food products, as sales performance of the two become increasingly polarised. Food sales, albeit positively distorted by inflation, continue to see annual growth, while in non-food categories which are predominantly capturing discretionary spending, retailers find themselves having to compete even harder."

Paul Martin, UK Head of retail at KPMG, said: "With inflation continuing to rise and wage growth stagnating, consumers are starting to feel the pinch - although the highly competitive nature of the UK grocery market continues to play out in the consumer's favour. Many retailers, particularly fashion stores, will be poised and ready to make the most of the upcoming summer, so hopefully the weather will play fair."

Economist Sam Tombs at Pantheon Macroeconomics agreed that the survey indicated consumers are struggling to spend more now that inflation is exceeding wage gains, noting the BRC's measure of shop price inflation now greatly exceeds 2016's average

Although April's strong growth in sales values was unlikely to be sustained as it was boosted by the later Easter this year, the Easter boost usually amounts to around three percentage points. "So the BRC's data also signals an underlying deterioration," he said.

With other surveys also showing a weakening in May, he added: "Fundamentally, consumers are unable to sustain last year's rapid growth in spending now that their real wages are falling, employment is rising only moderately and the saving rate already has been slashed to a record low."

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