Inflation rises taking toll on shoppers as retail sales fall

● High street hit as inflation nudges a four-year high ● But food & drink sales boosted by warmer weather

Consumers are tightening their belts in the face of rising inflation according to latest figures out today which show retail sales sunk last month.

The latest British Retail Consortium (BRC)-KPMG report found that like-for-like retail sales dropped by 0.4 per cent in May, down from 0.5 per cent growth last year.

Online sales of non-food products also slumped to the lowest level of growth since records began in 2012, increasing by 4.3 per cent last month compared to a 13.7 per cent jump in 2016.

However, food sales reached their highest level in more than five years at 3.2 per cent for the three months to May. Sales of food and drink were boosted by the warm weather in the run-up to the May bank holiday, with double-digit growth in beer, wine and spirit sales.

Paul Martin, UK head of retail at KPMG, said retailers had been “brought back down to earth with a thump” after April’s sales surge due to the timing of the Easter holidays.

He said: “The impact of inflationary pressures on the nation’s purse continues to play out in this month’s figures, with shoppers evidently spending more on food and drink than on non-food purchases. 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.”

Inflation hit its highest level for nearly four years in April at 2.7 per cent, tightening the squeeze on consumers, who are already struggling due to low wage growth.

The Office for National Statistics (ONS) announced in May that household spending hit 0.3 per cent in the first three months of the year, ekeing out its lowest quarter-on-quarter growth since 2014. However, the warm weather helped retail sales outstrip expectations to rise by 2.3 per cent month-on-month in April, according to the ONS.

BRC chief executive Helen Dickinson added: “Underneath the headlines, there’s continued variation in the performance of food versus nonfood products, as sales performance of the two become increasingly polarised.” Separate figures from Barclaycard showed consumer spending growth fell to a ten-month low of 2.8 per cent in May.