- UK retail sales fell at their sharpest rate since 1995 last month, according to the British Retail Consortium.
- While the timing of Easter was partly to blame, weakening consumer confidence was the key driver.
- “Even once we take account of these seasonal distortions, the underlying trend in sales growth is heading downwards,” the BRC’s chief executive Helen Dickinson said in a statement.
LONDON – British retail sales slowed at their fastest pace on record last month sending a troubling warning about the state of the UK’s consumers nearly two years after the vote to leave the EU.
According to data from the British Retail Consortium’s widely respected monthly survey of shop sales, same-store sales dropped 4.2% in April compared to the year before, while on a total sales basis, that drop was 3.1% – a record fall since the beginning of the survey in 1995.
The figures are somewhat skewed by the timing of Easter, which was earlier than normal in 2018, pushing spending forward. However, even without that setback, sales look very weak indeed.
“It is extremely rare for total sales to fall outright,” Samuel Tombs, chief UK economist at Pantheon Macroeconomics said.
“Even once we take account of these seasonal distortions, the underlying trend in sales growth is heading downwards,” the BRC’s chief executive Helen Dickinson said in a statement.
Here’s the chart, courtesy of Pantheon Macroeconomics:
Retail sales – while not one of the core economic data points like inflation or GDP growth – nonetheless provide a helpful steer of the UK economy’s fate. Retail sales are linked strongly with consumer confidence, which itself tends to be one of the main drivers of economic growth.
The basic logic is that if consumers are confident about their future financial state, they are more willing to spend money, which in turn boosts consumption in the economy, and drives up growth. When times are bad, the opposite is true, something which the BRC’s survey seems to suggest.
“The BRC’s survey adds to evidence that consumers have tightened their purse strings this year and are prioritising repairing their balance sheets over spending more,” Tombs wrote.
After the vote to leave the EU, consumer confidence was severely dented as a cocktail of rising inflation and slow wage growth deterred Brits from spending. However in recent months as inflation has dropped and wages have grown, it looked as though the worst of the consumer squeeze may be over.
Wednesday’s data seems to suggest the opposite, and that’s bad news for the economy as a whole. The UK economy is already growing at its slowest rate in five years, so any further downside could spell trouble.
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