Waning confidence puts brakes on retail sales growth

Retail sales growth slowed in March, according to fresh data released on Tuesday, as waning consumer confidence took the wind out of the sector’s recovery from the pandemic.

The BRC-KPMG retail sales monitor showed that on a total basis, sales increased 3.1% in March, against an increase of 13.9% in March last year.

That was worse than the three-month average growth of 6.9%, and the 12-month average growth of 10.3%.

On a three-year basis, total retail sales were ahead 5.4% during March, compared with the same month in 2019, before the Covid-19 pandemic.

UK retail sales decreased 0.4% on a like-for-like basis from March 2021, when they had increased 20.3%.

That was worse than the three-month average growth of 3.2% and the 12-month average growth of 6.5%.

“As consumer confidence continued to sink, March saw sales slow, and while spend remained above last year this likely reflects higher prices,” said British Retail Consortium (BRC) chief executive Helen Dickinson OBE.

“Beauty and fashion items were popular last month, as consumers took to their town and city centres for some retail therapy in the run up to Mother’s Day.

“While it is promising to see experiential shopping back in fashion, much in-store retail has not recovered to its pre-pandemic level.”

Dickinson said online sales also decreased compared to last year, but remained “well above” 2019 levels due to investment by retailers in their digital offer.

“The rising cost-of-living and the ongoing war in Ukraine has shaken consumer confidence, with expectations of people’s personal finances over the next 12 months reaching depths not seen since the 2008 financial crisis.

“Furthermore, households are yet to feel the full impact of the recent rise in energy prices and National Insurance changes.”

There was also potential for further supply chain disruption, Helen Dickinson said, with China putting key manufacturing and port cities into lockdown.

“Ultimately, consumers face an enormous challenge this year, and this is likely to be reflected in retail spend in the future.”

Elsewhere in the data, over the three months to March food sales decreased 2.6% on a total basis and 3.1% on a like-for-like basis.

That was below the 12-month total average growth of 0.8%, while for the single month of March, Food was in decline year-on-year.

Over the three-months to March, non-food retail sales increased by 14.9% on a total basis and by 8.6% on a like-for-like basis.

That was worse than the 12-month total average growth of 18.3%, while for the single month of March, non-food was in growth year-on-year.

“Sales growth in March rose at the slowest rate so far this year, suggesting clouds on the horizon as household budgets come under pressure from rising costs, an increasing tax burden and competition from holidays,” said KPMG retail partner Don Williams.

“There is concern on what this could mean for consumer confidence and the impact on discretionary spend.

“Additionally, retailers are facing their own battle with rising costs and inflation, and are walking a tightrope between absorbing rising costs themselves or passing these on to consumers, when competition for share of a shrinking wallet is increasingly fierce.”