UK consumers appear to be cutting spending as retail sales have fallen 1.4% in the first three months of 2017. That's the biggest quarterly decline since 2010, according to the Office for National Statistics.
Sales are up 1.7% in March compared to the same month in 2016, but dropped sharply by 1.7% in February 2017 as price increases across all sectors started to hit household incomes.
Easter not to blame
IHS Markit chief European economist Howard Archer comments:
‘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.’
He believes a 2.4% month-on-month fall in March suggests that consumers are restricting discretionary spending, which also limited UK economic growth to 0.4% in the first three months of 2017.
Rising inflation is becoming a bigger issue as it will continue to chip away at purchasing power as earnings growth fails to materialise.
Archer argues that retail sales were better in 2016 as consumers wanted to beat an anticipated hike in prices, including laptops and chocolate bars.
Despite the negative outlook, online sales have jumped year-on-year by 19.5% and accounts for 15.5% of all retail spending.