FEARS of a sharp UK economic slowdown have been fuelled by data showing retail sales volumes tumbled 1.8 per cent last month, producing the steepest drop for any calendar quarter since 2010.
The seasonally-adjusted figures, published yesterday by the Office for National Statistics, heightened worries that household finances are becoming ever-more stretched.
UK retail sales volumes in the first quarter were 1.4 per cent lower than in the preceding three months, the ONS figures show.
The 1.8 per cent month-on-month plunge in sales volumes in March was much worse than the 0.2 per cent fall forecast by the City.
Sterling was weighed down by the poor retail sales figures, which add to fears of a significant hit to the UK economy from the surge in inflation caused by sterling weakness triggered by the Brexit vote last June.
The pound was, at 5pm yesterday, trading around $1.2782, down nearly half-a-cent on its close in London on Thursday.
Food sales volumes dropped by 0.5 per cent month-on-month in March. And non-food sales, the more discretionary element of high street spending, tumbled by 2.4 per cent.
The ONS said the weakness of first-quarter retail sales volumes “seems to be a consequence of price increases across a whole range of sectors”.
The latest retail sales deflator signalled prices in March were up 3.3 per cent on a year earlier. This is the greatest year-on-year increase since March 2012.
David Lonsdale, director of the Scottish Retail Consortium, said: “Consumer demand has often proven a reliable source of growth in the economy but this will be tested in the period ahead, as Scots find themselves buffeted by rising overall inflation and with higher council tax and higher employee pension contributions in the pipeline.”
Howard Archer, chief UK economist at IHS Markit, said: “This is a really dire retail sales performance – there is no other word for it - even allowing for the possibility that the later Easter this year pulled some sales back to April from March.”
Mr Archer highlighted his belief that gross domestic product data due next week would show a “significant dent” in the resilience of the economy during the first quarter.
He predicted the figures would reveal UK growth slowed sharply to just 0.4 per cent in the first quarter, from 0.7 per cent in the preceding three months.
Mr Archer said: “A preliminary estimate out on Friday from the Office for National Statistics is expected to show that the UK economy’s resilience since last June’s Brexit vote suffered a significant dent in the first quarter.”
He added: “The first-quarter GDP growth slowdown is expected to have been primarily the consequence of increasingly squeezed consumers markedly reining in their spending.
“Following the likely marked first-quarter slowdown, we suspect that 2017 will become even more challenging for the UK economy, and particularly for consumers as their purchasing power is squeezed harder still.”
Martin Beck, senior economic adviser to the EY ITEM Club, said: “March’s weakness was broad-based, with department stores the only major sector to see sales volumes increase on the previous month. The likely culprit for this weakness remained a familiar one – rising shop-price inflation.”
He added: “Q1’s decline in sales will have shaved close to 0.1 percentage points off GDP growth in that period. Combined with a poor set of macro data from other sectors, growth looks likely to have slowed from 0.7 per cent in Q4 2016 to around 0.4 per cent [or] 0.5 per cent.”
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