Rising living costs and a fall in disposable income have led to the retail sales sector recording its biggest fall in seven years, according to a report from a UK government monitoring body.
According to the Office for National Statistics (ONS) during the first quarter of 2017, retail sales in the UK fell by 1.4 percent. According to the ONS, this was the third consecutive fall in the underlying three-month-on-three-month pattern, and the month-by-month fall was even more significant, amounting to a drop in sales of 1.8 percent.
The figures represent the first quarterly decline since 2013, and according to the ONS, this is directly related to price increases in a number of sectors of the UK economy. The organisation expects that the fall could reduce the overall economic growth figures by 0.1 percentage points for the first three months of the year.
Household goods outlets and the fuel retail sector saw the biggest drop in sales, with declines of 3.3 percent and 3.1 percent respectively, but the fall in sales appears to have been spread across most of the retail economy, with no single sector driving the decline. The only bright spots in the UK retail sector were textiles, clothing and footwear stores, which showing an increase of 1.9 percent in sales volume.
The drop in the value of sterling since last summer’s Brexit referendum, which has led to increases in manufacturers costs and a rise in the cost of import goods, underlies price rises across the whole of the sector. According to the ONS, the average growth of store prices during the quarter was the highest since March 2012, while petrol prices have rocketed by as much as 16.4 percent on average.
Rising prices across most of the retail sector did not feed into the rate of inflation, which remained at 2.3 percent in March, thanks to a fall in the cost of airline travel.
Responding to the data, a senior economic adviser for PwC said that the report showed that the post-Brexit surge of consumer spending in the retail sector was over. PwC also suggested that the figures, combined with a slowing of the growth of employment and the stagnation of real incomes pointed to the beginning of the anticipated slowdown in the UK economy.