‘Dismal’ month for supermarkets pushes down retail gross sales

A “dismal” month for supermarkets led to retail gross sales falling in Might on the quickest tempo for greater than a yr, the UK’s statistics physique has stated.

Gross sales volumes dropped 2.7% in Might, the largest month-to-month fall since December 2023, in keeping with the Workplace for Nationwide Statistics (ONS).

Meals retailers noticed decrease gross sales of alcohol and tobacco as households reduce, whereas clothes and family items shops reported “sluggish buying and selling”, the ONS stated.

Separate figures on the UK economic system confirmed that authorities borrowing hitting the second highest stage for Might since month-to-month data started in 1993.

Borrowing – the distinction between spending and tax earnings – was £17.7bn, up £0.7bn from Might final yr.

The ONS stated income from earnings tax and Nationwide Insurance coverage contributions rose, however spending noticed an even bigger enhance, partly attributable to inflation-linked uplifts to many advantages.

Might’s fall in retail gross sales adopted a 1.3% rise in April, when demand was boosted by sunny climate.

ONS senior statistician Hannah Finselbach stated the weak efficiency in Might was “primarily attributable to a dismal month for meals retailers, particularly supermarkets”.

“Suggestions advised lowered purchases for alcohol and tobacco with clients selecting to make cutbacks.”

The ONS additionally stated demand for DIY items had fallen final month, as shops reported that customers had accomplished house tasks sooner than normal this yr due to the great climate.

Gross sales volumes within the three months to Might had been nonetheless up by 0.8% in comparison with the earlier three months, which is seen as a greater information to underlying developments.

Nevertheless, Paul Dales, chief UK economist at Capital Economics, stated the information added to “different proof that the burst of financial development” within the early a part of the yr “is over”.

The UK’s economic system grew by 0.7% within the first three months of the yr, however newest figures present it contracted by 0.3% in April.

Mr Dales stated a few of Might’s decline in retail gross sales was because of the increase in April from the nice and cozy climate fading, however “the ONS additionally stated retailers famous inflation was prompting customers to chop again”.

On Thursday, the Financial institution of England held rates of interest at 4.25% however stated that underlying development within the economic system was “weak”.

Figures launched earlier this week indicated that inflation – the speed at which costs rise – remained at 3.4% within the yr to Might, with meals costs rising for the third month in a row.

Analysis launched on Friday by the ONS discovered that cost-of-living strain stays one of many key points going through folks within the UK.

Amongst those that had reported a rise of their value of dwelling previously month, the ONS stated essentially the most generally reported purpose was greater meals costs.

Jacqueline Windsor, head of retail at PwC UK, stated: “The truth that retail gross sales fell again in Might was not a shock given the unusually sturdy efficiency the earlier month.

“Nevertheless, it does underline the fragility of customers’ spending energy and the retail sector within the present financial local weather.”

The most recent figures on the general public funds present that the federal government has now borrowed £37.7bn within the first two months of the monetary yr.

That’s lower than the £40.7bn that the federal government’s impartial forecaster, the Workplace for Price range Accountability, had predicted on the time of the Spring Assertion in March.

Responding to the newest knowledge, Darren Jones, Chief Secretary to the Treasury, stated the federal government had “stabilised the economic system and the general public funds; now we have to be certain that the British economic system delivers for working folks”.

However shadow chancellor Mel Stride stated on social media platform X: “Labour is spending recklessly, with no plan to pay for it. Tax rises are coming.”

Thomas Pugh, an economist at tax and consulting agency RSM UK, stated the truth that borrowing this yr was under the OBR’s forecast would give Chancellor Rachel Reeves “one thing to cheer”.

Nevertheless, he added {that a} mixture of an underperforming economic system, greater borrowing prices and U-turns on welfare spending meant the chancellor “will in all probability should announce some top-up tax will increase after the summer time” if she is to fulfill her self-imposed guidelines on spending and borrowing.