Official data released today (24 June) by the Office for National Statistics (ONS) shows that clothing stores recorded a monthly increase in sales volumes of 2.2% as consumers planned holidays and therefore bought new clothes.
Overall retail sales volume fell 0.5% in May after rising 0.4% in April, revised after rising 1.4%. The value of retail sales, not adjusted for price changes, rose 0.6% after rising 1% in April. Compared to pre-coronavirus levels, total retail sales were 2.6% and 13.0% higher in volume and value, respectively.
The value of online spending, meanwhile, rose 1.7% from the previous month, driven by declines in non-store retail (-3.5%) and department stores (-1. 7%).
The proportion of online sales fell to 26.6% from 27.1% in April. Despite the fall in May, the share of online sales remains well above its level of 19.7% in February 2020 before the pandemic.
Commenting on May retail sales data from the ONS, Jacqui Baker, partner and head of retail at leading audit, tax and advisory firm RSM UK, notes that May was the first month that households have felt a pinch in their bills.
“Consumer confidence fell to -41% in May, a record low, which will not be good news for retailers who rely on people to spend. It’s no secret that consumers are feeling the pressure with higher energy bills at full throttle and the cost of living crisis eating away at household budgets. For many, spending will become increasingly dominated by the essentials, as opposed to luxuries.
“Despite this, in anticipation of the summer holidays and events like Jubilee weekend, consumers took the opportunity to shop for new outfits with clothing sales up 2.2% in May. This is likely to continue to be a key trend over the summer months, with more people switching from buying household items (down 2.3%) to spending on holidays and events. social instead. The decline in household goods was compounded by an increase in the price of goods, up 50% more than other retail categories.
Thomas Pugh, Economist at RSM UK, added: “The surge in inflation and the subsequent fall in real household incomes and consumer confidence do not bode well for retail sales over the year. next. However, the silver lining is that total spending continues to rise, with the value of retail sales up 5% year-over-year in May. This suggests that consumers are still willing to go out and spend, but just don’t get as much bang for their buck. Sales volumes fell 4.7% year on year in May.
“This suggests that retail sales will slow rather than collapse. Indeed, there are three main reasons why sales could hold up. First, households have a reserve of savings worth nearly 15% of GDP to be tapped to fight inflation Second, the extremely tight labor market means that the unemployment rate is unlikely to jump sharply Third, additional government support will begin to support low-income households income during the second half of the year.
Meanwhile, Lynda Petherick, head of retail at Accenture UK and Ireland, said today’s slight drop in sales would come as no surprise to a sector struggling with rapidly rising costs, as well as pressure to keep prices low for struggling households.
“Inflation remains a key issue for retailers, who must deal with rising supply chain costs, as well as keeping their stores afloat and paying their staff well. For consumers, the Rising commodity costs mean many don’t have excess cash to spend on discretionary items,” she adds.
“There have been calls to help consumers by keeping prices low, which will be easier said than done for retailers. Rising costs will have left many businesses short this summer, especially at a time when customers are typically spending more. Retailers with the right technology in place to help reduce costs while providing a good customer and employee experience are more likely to weather the storm than those that don’t. »