Yahoo Finance UK retail sales fall as cost of living and Ukraine war hit consumer confidence
UK retail sales slowed in March although spending remained above last year, likely reflecting higher prices as the rising cost-of-living and the conflict in Ukraine dented consumer confidence.
The British Retail Consortium (BRC) and KPMG's retail sales monitor showed total sales surged 3.1% in March, compared to a 13.9% rise in March 2021. That was worse than the three-month average growth of 3.2% and the 12-month average growth of 6.5%.
On a three-year basis, sales grew 5.4% last month compared with the same time in 2019. On a like-for-like basis, sales decreased 0.4% from March 2021, when they had increased 20.3%.
The sales monitor compared sales on a year-on-year basis, with those focused on online and in-store also being compared with March 2019 — before the pandemic.
BRC said that the sales figures were not adjusted for inflation as February inflation grew to a historic high of 6.2%, a portion of the sales growth will reflect rising prices as opposed to an increase in volumes.
Helen Dickinson OBE, CEO of BRC, said: "The rising cost-of-living and the ongoing war in Ukraine has shaken consumer confidence, with expectations of people’s personal finances over the next 12 months reaching depths not seen since the 2008 financial crisis.
"Furthermore, households are yet to feel the full impact of the recent rise in energy prices and national insurance changes.
"There is also potential for further supply chain disruption, with China putting key manufacturing and port cities into lockdown.
"Ultimately, consumers face an enormous challenge this year, and this is likely to be reflected in retail spend in the future."
Read more: UK retail footfall nears pre-pandemic levels but inflation pressure looms
In the quarter to March, food sales decreased 2.6% on a total basis and decreased 3.1% on a like-for-like basis. Total non-food sales surged by 14.9% and by 8.6% on a like-for-like basis.
Over the three months to March, in-store sales of non-food items grew 92.9% on a total basis and 74.9% on a Like-for-like basis, an improvement on the total 12-month average growth of 69.9%.
On a three-year comparison, over the three months to March, in-store sales of non-food items declined 18.2% on a total basis and 3.9% on a like-for-like basis since March 2019.
Online non-food sales decreased by 29% during March, compared with growth of 64.7% in March 2021. This was worse than the 3-month decline of 27.3%, the BRC. said.
"Sales growth in March rose at the slowest rate so far this year, suggesting clouds on the horizon as household budgets come under pressure from rising costs, an increasing tax burden and competition from holidays," said Don Williams, retail partner at KPMG. "There is concern on what this could mean for consumer confidence and the impact on discretionary spend."
"Additionally, retailers are facing their own battle with rising costs and inflation, and are walking a tightrope between absorbing rising costs themselves or passing these on to consumers, when competition for share of a shrinking wallet is increasingly fierce."
A recent PwC’s report suggested the mood among consumers about their finances suffered its biggest fall in March since the financial crisis of 2008 amid the tightest cost of living squeeze in a generation.
UK inflation hit a 30-year high of 6.2% in February and is predicted to rise over 8% this month.
