Retail sector data points to reduction in discretionary purchases as consumers pay more for staples .High food inflation pushed up UK grocery spending last month, prompting many consumers to cut back on discretionary purchases, according to retail sector data published on Tuesday.
Figures from trade body the British Retail Consortium and KPMG, the advisory services firm, showed that UK food sales increased by an annual rate of 9.6 per cent in May, well above the 12-month average of 6.9 per cent.
The figure was also more than double the overall retail growth rate of 3.9 per cent, the slowest in six months, highlighting how rising food prices are now the main driver of overall inflation.
May’s pace of overall retail spending was dragged down by non-food sales, which remained largely flat at 0.7 per cent. BRC data is not corrected for the pace of price changes, suggesting that consumers bought fewer goods than in May 2022.
Paul Martin, UK head of retail at KPMG, said the grocery sector was the “fastest growing part of the consumer wallet”, which meant that consumers were “having to spend more . . . in the one area that is getting disproportionately more expensive”.
UK inflation declined less than expected between March and April, from 10.1 per cent to 8.7 per cent, according to official data published last month. In April, food prices rose at an annual rate of 19.1 per cent, only marginally down from a 45-year high of 19.2 per cent in March.
Martin added that retailers would “be hoping that inflation levels in the wider economy continue to move in the right direction in order to boost much-needed consumer confidence”.
Separate data from Barclays, which monitors almost half of all UK credit and debit card transactions, also showed fast-rising supermarket spending, up 9.4 per cent in May. In addition to high food inflation, the bank attributed the increase in grocery spending to parties to mark the Coronation bank holiday weekend and Eurovision Song Contest.
Spending at pubs and on takeaway meals also continued to perform well, posting rises of 6.4 per cent and 13 per cent respectively. But expenditure in restaurants and on furniture and electronics all contracted compared with the year before, with purchases of household goods and clothing down 4.2 per cent and 5.1 per cent respectively compared with May 2022.
Overall consumer spending rose only 3.6 per cent, according to Barclays, well below the rate of inflation and down from 4.3 per cent in April. Esme Harwood, director at Barclays, said many consumers were “having to forgo discretionary purchases to offset rising food prices, with clothing and restaurants most impacted”.
Meanwhile, spending on fuel fell 10.7 per cent, the bank said, reflecting the decline in energy costs since May last year, when gas and petrol prices soared after Russia’s full-scale invasion of Ukraine.
Silvia Ardagna, head of European economics research at Barclays, said the drop had helped the UK avoid a technical recession — defined as two consecutive quarters of economic contraction. But she added that “the forward-looking outlook remains one in which the economy is likely to stagnate”.