New data suggests that the rising cost of living is already impacting consumer spending, with retail sales falling last month.
The BRC-KPMG Retail Sales Monitor shows that total retail sales fell 0.3% year-on-year in April, the first decline in 15 months and down from growth of 3.1% in March and 6.7% in February.
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BRC Chief Executive Helen Dickinson said: “The rising cost of living has crushed consumer confidence and put the brakes on consumer spending.”
She noted that big-ticket items had been hit hardest, as consumers reigned in spending on furniture, electricals and other homeware; compounded by delays on goods coming from China related to renewed Covid restrictions.
The annual comparison in April was dragged down by the reopening of shops when lockdown ended last year but was also boosted by rising prices as BRC data is not adjusted for inflation.
Given that inflation is running at its highest level in 30 years, the BRC suggested that the small drop in sales masked a much larger drop in volumes.
Whilst acknowledging that consumers were facing a difficult year as inflation heads towards more than 10%, Dickinson stressed that retailers are experiencing higher costs as a result of rising commodity prices, transport costs, labour shortages, delays at ports, and the war in Ukraine.
“Further headwinds are incoming, such as rising global food prices, which rose 13% between March and April,” she said. “Retailers will continue to do all they can to mitigate the effects of these costs rises, but unfortunately they cannot absorb them all.”
NAM Implications:
- In other words, on-shelf prices have to rise to reflect cost price increases…
- Except that Aldi & Lidl in the UK are in a position to run at breakeven/loss at the expense of their overseas business.
- But suppliers have run out of slack (cannot fund retail losses)
- Anticipate more growth of discounters…
This article first appeared on Kamcity
