Squeezed households dampen demand

Retail sales volumes fell by 1.4 per cent last month – faster than the 0.5 per cent drop in February – according to the latest data from The Office for National Statistics (ONS).

Online sales were hardest hit, dropping 7.9 per cent in March, “due to lower levels of discretionary spending”, the ONS said, following on from a 6.9 per cent fall in February. There was also a decrease in fuel sales volumes of 3.8 per cent as soaring petrol and diesel costs put motorists off making unnecessary journeys, it added.

Although, the only part of the retail sector that saw an increase in sales in March was in non-food stores, which were up by 1.3 per cent, driven by a 2.6 per cent rise at household goods retailers including garden centres and DIY stores.

The ONS suggested that the fall in online sales could be due to the end of lockdown restrictions and shoppers feeling confident returning to stores, when compared with December and January as the Omicron COVID variant was still around.

According to these latest ONS figures, online spending fell to 26 per cent as a proportion of total sales – the lowest since February 2020, immediately before the pandemic began.

It warned that the recent sales decrease could be linked to “affordability concerns” with people spending less on “non-essentials” due to an increase in the cost of living.

Helen Dickinson, Chief Executive of the British Retail Consortium, said the cost-of-living squeeze has many consumers “thinking twice about major purchases”, while their expectations of future financial situations plummeted to lows not seen since the financial crisis…

“Retailers are themselves squeezed between rising costs of operations, exacerbated by the situation in Ukraine,” she said, “and weaker demand from customers. Higher global commodity prices, rising energy and transport costs, and a tight labour market, are all taking their toll.”