Britons will go to the polls with High Street spending sagging under the biggest spike in prices for five years, gloomy official figures have revealed.
The shock retail sales figures showed a dramatic 1.8% slump in retail spending in March as consumer wallets succumb to steadily rising inflation and anaemic wage growth.
The 15% slide in sterling since last June’s Brexit is hitting shoppers with just weeks to go before the snap June 8 general election called by Theresa May on Tuesday.
The Office for National Statistics data showed spending also down 1.4% over the first quarter, the biggest decline for seven years. Senior statistician Kate Davies said the slump “seems to be a consequence of price increases across a whole range of sectors”.
The ONS’s deflator, its measure of how much prices are rising, showed average retail prices 3.3% ahead of a year ago, the biggest such rise since March 2012.
ING’s senior UK economist James Knightley called the figures “dreadful”. He said: “The story for the household sector isn’t great right now. Inflation is eating into household spending power with wages once again failing to keep pace with the rising cost of living. There is also a growing sense of job insecurity highlighted in some surveys, which may also be making households a little nervous.”
The dire performance reversed earlier gains for the pound, which stood 0.2 cents lower. It came a day after Debenhams revealed plans to close 10 stores, and also hit the shares of retailers including Next and Marks & Spencer.
The ONS also warned that retail sales were likely to shave around 0.1 percentage points off the UK’s overall growth in the first three months of 2017, the first time the sector has been a headwind to the economy since late 2010.
Sales fell across the board on the month, with only department stores seeing an rise. Clothing and footwear lost 0.9%, sales of household goods were flat and “others”, embracing everything from carpets to jewellers and pharmacies, plunged 7.7%.
The figures are also likely to stay the growing hawkishness of some rate-setters on the Bank of England’s monetary policy committee, who were concerned over rising inflation amid the economy’s surprising post-Brexit resilience.
Scotiabank’s Alan Clarke said: “Slower wage inflation, coupled with slower consumer spending growth are two of the three swing factors that the MPC minutes told us would have an influence on monetary policy. My guess is that the ‘some’ MPC members that were thinking about voting for a rate hike in March will be more hesitant now.”