Retail Sales Plunge as Consumer Confidence “Nears Financial Crisis All-Time Low” | business news
According to official figures, retail sales fell 1.4% last month – far more than expected – as consumers tightened their belts amid the drop in the cost of living.
The Office for National Statistics (ONS) said the drop was largely due to a drop in demand for online purchases, pointing to generally subdued demand amid rising inflation.
Aside from hardware store owners, there was little sign of optimism among retailers, although data suggested COVID-weary consumers were instead shifting their spending to hospitality and attractions as the weather improved.
Economists had expected sales to fall 0.3%m/m, while the ONS also revised downwards on February’s decline in retail sales.
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The numbers, released as a closely watched gauge of consumer confidence and covering April, returned the second-lowest reading since records began almost 50 years ago.
ONS Director of Economic Statistics Darren Morgan said of the retail sales data: “Retail sales fell significantly in March as rising cost of living weighed on consumer spending.
“Online sales have been hit particularly hard due to reduced free spend.
“Fuel sales also fell significantly, with evidence suggesting some people reduced non-essential trips after record-high gasoline prices, while grocery sales continued to fall, falling for the fifth straight month.”
All of this makes for worrying reading at the Bank of England.
The GfK index, derived from a survey, came in worse than economists had expected at -38 and just below the all-time low of 2008, when the global financial crisis was gaining momentum.
The responses were registered at a time when we learned that inflation had hit one 30-year high of 7%.
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Inflation hits 30-year high
This comes from the Office for Budget Responsibility rise above 9% following the unprecedented hike in the energy price cap in April – and the rise in other household bills such as mobile, water and broadband are reflected in the calculations.
The price cap is currently expected to rise further – by as much as £500 – in October when the impact of the Russian invasion of Ukraine is factored in.
GfK reported a sharp drop in consumer purchase intentions – a factor to be taken into account by the bank’s rate-setters, who had signaled more caution ahead with rising interest rates after raising interest rates to 0.75% at their last meeting.
They will be keen not to choke off economic growth with rising interest rates designed to curb rising inflationary expectations such as wage increases rather than rising prices, since inflation has been caused by factors beyond their control, such as energy and food costs.
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Inflation, while not demand driven, is still proving to be more stubborn and prolonged than policymakers had anticipated and financial markets are still expecting a 0.25% rate hike at the next Monetary Policy Committee meeting in two weeks.
That’s because the inflationary fires were fueled by Russia’s war against Ukraine.
Commenting on the survey results, Joe Staton, Client Strategy Director at GfK, said: “This is bad news for consumer confidence and with little prospect of an economic recovery on the horizon, we can only forecast further declines in the index over the coming year.”
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