Alarm as food sales slump
Thursday 16 June 2011
Rising prices and weak demand caused sales volumes in Britain's food stores to slump more than 3% over the last year.
In reporting a bigger-than-expected drop in month-on-month volumes of 1.4% for the whole retail sector, the Office for National Statistics (ONS) said supermarkets, electrical goods and DIY stores appeared to be bearing the brunt of the squeeze on household budgets.
It said food store volumes fell by 3.5% year-on-year during May, although the value of sales rose by 1.7% after retailers lifted prices by 5.3% to offset inflationary pressures.
Economists expressed alarm at the latest gloomy survey, although they pointed out the headline monthly figure of minus 1.4% was distorted by the previous month's boost from the weather and royal wedding.
Vicky Redwood, an analyst at Capital Economics, said the outlook for the rest of the year was poor.
She said: "We expect this trend to worsen as households respond to the intensifying squeeze on their real pay. We continue to think that overall household spending will drop by about 1% this year."
The food store figures were the worst monthly performance for three years and a resumption of the monthly falls seen in the 14 months prior to April.
Household goods and clothing sales also fell especially sharply in May, with furniture, electricals goods and DIY volumes 6% lower compared than last year, although the comparative period was boosted by pre-World Cup spending.
Grocery giants Sainsbury's and Tesco both warned this week that higher petrol prices were having an impact on consumer spending, with Sainsbury's adding that its cheapest Basics brand was the fastest-growing at the store chain, signalling a move by customers to keep their costs down.
The ONS added that the amount of money spent on food compared to other items fell to 42p in May from 43p in April.
Richard Lim, an economist at the British Retail Consortium, said: "A return to sunny weather through the summer may provide another lift to retail sales, but it will take more than the holiday season to fix the underlying problem of low consumer confidence."
May's decline slashed year-on-year volume growth to just 0.2% from 2.4% in April, a figure which was revised lower today from 2.8%.
The British Chambers of Commerce (BCC) said the report was a clear sign that any move to raise interest rates would be a "mistake" given the pressures facing businesses and consumers and with the Government's fiscal austerity programme continuing to bite.
It is forecasting that GDP will grow by only 0.3% in the second quarter of 2011, much less than official and City analysts are predicting.
BCC chief economist David Kern said: "More must be done to sustain growth and empower businesses to create jobs, export and invest. Productivity has fallen significantly since 2008 and recouping these losses must be a key policy priority."
- 3 Oil tanker with $100 million cargo goes missing off Texas coast
- 4 George Galloway attacked on Notting Hill street by man 'shouting about the holocaust'
- 5 Brother and sister, Christopher Buckner and Timothy Savoy, arrested for 'committing incest after watching 'The Notebook''
Keira Knightley topless: Usually conservative actress does own take on #Freethenipple campaign for Interview Magazine
YouTube video posted by Isis militants shows 'execution of 250 Syrian soldiers'
Oil tanker with $100 million cargo goes missing off Texas coast
George Galloway attacked on Notting Hill street by man 'shouting about the holocaust'
Brother and sister, Christopher Buckner and Timothy Savoy, arrested for 'committing incest after watching 'The Notebook''
Robin Williams Emmys tribute led by Billy Crystal criticised for including 'racist' joke about Muslim woman
The Rotherham child abuse scandal is a tale of apologists, misogyny and double standards
Scottish independence TV debate: Pumped-up Alex Salmond bounces back in bruising second round against Alistair Darling
Do you realise just how foolish the UK looks?
Ukip Douglas Carswell defection: Tory MP jumps ship to join Nigel Farage
When elitism grips the top of British society to this extent, there is only one answer: abolish private schools
- < Previous
- Next >
iJobs Money & Business
£50000 - £80000 per annum + benefits+bonus+package: Harrington Starr: Data Sci...
£450 - £500 per day: Orgtel: SAS Business Analyst, London, Banking, Credit Ris...
£32000 - £38000 Per Annum Bonus, Life Insurance + Other Benefits: Clearwater P...
£200 - £250 per day + competitive: Orgtel: KYC Analyst, Key Banking Client, Bi...