Retail sales slumped badly in the UK in March, data from the Office for National Statistics showed on Friday, and came in significantly worse than market consensus.
March's retail sales volumes dropped by 1.4% from the month before, worsening from February's revised 0.5% fall. According to FXStreet, market consensus had tipped just a 0.3% month-on-month fall in March.
ONS director of economic statistics Darren Morgan said: ‘Retail sales fell back notably in March, with rises in the cost of living hitting consumers' spending.
‘Online sales were hit particularly hard due to lower levels of discretionary spending.
‘Fuel sales also fell substantially, with evidence suggesting some people reduced non-essential journeys, following record high petrol prices, while food sales continued to fall, dropping for the fifth consecutive month.’
The ONS said the largest contribution to the fall came from non-store - meaning online - retailing, where sales volumes fell by 7.9% over the month following a fall of 6.9% in February.
Pantheon Macroeconomics Chief UK Economist Samuel Tombs said: ‘March's substantial fall in retail sales volumes looks like the start of a period of weakness in consumers' spending, rather than just a blip.’
GfK's Consumer Confidence Index fell five points to minus 31 in March as consumers confront a ‘wall of worry’ amid 30-year-high levels of inflation.
It is the fourth month in a row that the survey's headline figure has dropped, to a level last seen in October and November 2020 when Covid numbers were rising.
‘The data, together with the further sharp fall in consumers' confidence in April, surely quashes any remaining chance that the MPC might raise Bank Rate by 50bp next month, though a 25bp hike still looks likely,’ Pantheon's Tombs added.
Despite March's woeful sales performance, volumes were 20% above their pre-coronavirus February 2020 levels.
Food store sales volumes fell by 1.1% in March from February and have fallen each month since November 2021, the ONS noted.
‘Higher spending in pubs and restaurants linked to reduced coronavirus restrictions, as well as the impact of rising food prices on the cost of living are possible factors for reduced spending in food stores,’ the stats body added.
Non-food store sales volumes rose by 1.3% in March from February.
The proportion of retail sales conducted online fell to 26% in March 2022, its lowest proportion since February 2020.
Tombs continued: ‘Looking ahead, we expect retail sales volumes to fall further over the coming months as the pressure on households' finances from high inflation builds and consumers prioritise spending on services with they forewent during the pandemic. Indeed, households' real disposable incomes look set to fall by about 2% quarter-on-quarter in the second quarter and be about 2.5% lower in this year than last, the biggest drop since records begin in 1947.’
Added Helen Dickinson, chief executive of the British Retail Consortium: ‘The cost-of-living squeeze has many consumers thinking twice about major purchases, while their expectations of future financial situation plummeted to lows not seen since the financial crisis. Consumers face even more challenges as the energy price cap rose to a record high this month.’
Here is what you need to know at the London market open:
FTSE 100: down 0.5% at 7,592.26
Hang Seng: down 0.1% at 20,661.77
Nikkei 225: closed down 1.6% at 27,105.26
S&P/ASX 200: closed down 1.6% at 7,473.30
DJIA: closed down 368.03 points, or 1.1%, at 34,792.76
S&P 500: closed down 65.79 points, or 1.5%, at 4,393.66
Nasdaq Composite: closed down 278.41 points, or 2.1%, at 13,174.65
EUR: down at $1.0844 ($1.0852)
GBP: down at $1.2990 ($1.3040)
USD: down at JP¥127.92 (JP¥128.45)
Gold: up at $1,953.80 per ounce ($1,945.88)
Oil (Brent): down at $106.48 a barrel ($108.22)
(changes since previous London equities close)
ECONOMICS AND GENERAL
Friday's key economic events still to come
0930 CEST Germany flash purchasing managers' index
1000 CEST EU euro area balance of payments
1000 CEST EU flash PMI
0930 BST UK S&P Global-CIPS flash PMI
1100 BST Ireland wholesale price index
0945 EDT US flash manufacturing PMI
0945 EDT US flash services PMI
Ukrainian President Volodymyr Zelensky has contradicted claims by Russian President Vladimir Putin that the strategically vital Ukrainian port city of Mariupol had finally fallen to the Russian military on Thursday. Putin appeared on Russian state television with Defence Minister Sergei Shoigu to announce that he was rescinding the order to storm Mariupol's Azovstal steel plant, where the remaining Ukrainian forces in the city are surrounded, adding that he now planned to seal the plant ‘so that not even a fly can get in or out’. Putin also reiterated his demand that the encircled Ukrainian fighters in the city lay down their weapons and surrender if they wanted to escape with their lives. The city continues to resist the Russians, Zelensky said in his nightly video message. ‘Despite what the occupiers say about them.’ He had earlier said that Mariupol was not yet a totally lost cause. ‘The situation is difficult, the situation is bad,’ Zelensky told journalists in Kiev on Thursday, but there were several ways to liberate the city still remaining.
BROKER RATING CHANGES
RBC cuts Anglo American to 'sector perform' ('outperform') - target 3,400 (4,400) pence
Berenberg cuts Anglo American price target to 4,000 (4,300) pence - 'buy'
Jefferies raises Berkeley Group to 'buy' (hold) - price target 5,587 (4,703) pence
COMPANIES - FTSE 100
Variety goods store chain B&M European Value Retail said its long-time Chief Executive Simon Arora is stepping down next year. B&M European Chair Peter Bamford has begun planning for Arora's successor, who has led the firm for 17 years, and who plans to retire in 12 months. Simon Arora's brother, Bobby Arora, will remain with the company in his current role, as group trading director.
COMPANIES - FTSE 250
Ukraine-focused iron ore pellet producer Ferrexpo said its production in 2021 - so before the Russian invasion of Ukraine - was flat, but its revenue saw a boost from higher prices. Ferrexpo recorded a pretax profit of $1.07 billion, rising from $747.9 million in 2020. Revenue rose to $2.52 billion from $1.70 billion. Pellet production was flat at 11.2 million tonnes, while its sales volume dropped 6% to 11.4 million tonnes from 12.1 million tonnes. Ferrexpo pointed out, however, that average Platts CFR 62% iron ore fines price rose to $160 per tonne from $109 per tonne in 2020. For higher grade iron, prices increased to $186 per tonne from $122. Chief Executive Jim North said: ‘The events of early 2022 have changed Ukraine significantly, but our business model and our resolve remains unchanged. We continue to produce high grade iron ore pellets, and we are continuing to invest in growing our business for the future, which will help further support the Ukrainian economy to rebuild.’
COMPANIES - SMALL CAP
Russian miner Petropavlovsk said its first quarter production has increased, despite the fallout from the war in Ukraine, but it has seen sales fall as it looks for new buyers. In the March-quarter, total gold production increased 8% on the year before to 103,000 ounces. Own-mined gold production dropped 3% to 82,400 ounces, owing to lower production at the Albyn and Malomir mines, but third-party concentrate gold production increased 73% to 22,800 ounces. Total gold sales dropped to 89,800 ounces from 95,600 ounces, but the average realised gold price in the quarter improved to $1,871 per ounces from $1,789. Chief Executive Denis Alexandrov said: ‘Despite the conflict in Ukraine and related sanctions that have led to various challenges at the corporate level, our mines operated without disruption throughout the period.’ Petropavlovsk said, at the moment, there are no direct sanctions on the company or any of its subsidiaries. It did, however, note it is prohibited from selling gold to Gazprombank, a lender to Petropavlovsk which had acted as the main off-taker for the company's production ‘The group continues to explore options for the sale of its gold, including to other potential buyers, and has applied for a new licence to export gold,’ it added.
Currency manager Record ended its financial year with over $83 billion in assets under management equivalent, but the total had slipped over the final quarter of financial 2022. Record ended March 31 with $83.1 billion AuME, down from $85.3 billion at December 31. ‘As expected, increased uncertainty in financial markets linked predominantly to the war in Ukraine impacted the value of some clients' underlying portfolios, reflected by a decrease in AuME of $2.3 billion, or 2.7%, from market movements over the quarter,’ Chief Executive Leslie Hill explained. Over the course of the year, however, Record noted its AuME advanced by 3.7%, or $3,0 billion.
COMPANIES - GLOBAL
Enterprise software firm SAP reported a first-quarter operating profit of €1.05 billion, up 10% from a year before, on revenue of €7.08 billion, up 11% or 7% at constant currency.
Friday's shareholder meetings
Bellevue Healthcare Trust PLC - AGM
Faron Pharmaceuticals Ltd - AGM
Murray International Trust PLC - AGM
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