Retail sales fell by 0.9% last month

Shoppers in the UK saw a 0.9% decline in retail sales between February and March. Shop owners attributed the drop in foot traffic to the recent rain.

Department stores and clothes retailers reported significant financial losses after the sixth wettest March since 1836.

Due to the difficulty in finding particular products, official statistics revealed that food shop sales also declined by 0.7%.

The quantity of fresh tomatoes and cucumbers that could be sold in several stores was restricted due to the unfavorable weather in Spain and North Africa.

The Office for National Statistics (ONS) said that “26% of adults experienced shortages of essential food items that were needed regularly” for most of March. This was more than the 18% who said they had similar problems in February.

People bought 3% less food last month than in February 2020, before the pandemic. Retailers said this was because of the higher cost of living and higher prices.

Even though sales went down in March, they went up by 0.6% in the first three months of the year compared to the previous three months, according to the ONS. This was the first rise in quarterly sales since August 2021.

Inflation, which is the rate at which prices are going up, hit 10.1% in March. This was mostly because food prices were going up. People had thought that the rate would drop below 10%.

But the drop in food production prices, which the British Retail Consortium (BRC) says peaked in October last year, has yet to reach supermarkets.

The BRC said it takes between three and nine months for lower prices to reach stores, but it said on Wednesday that it expected food prices to start going down “over the next few months.”

Stretched funds from retail sales

Everyone feels the effects of food prices going up. Separate numbers from the ONS show that 96% of the people they polled said that the rising cost of living in the last month was due to the price of food.

That was more than the 77% who said gas and power bills were the reason.

As a result, many said they were cutting back on non-essential buying, which could include fashion and almost half of those asked said they were shopping around more. In addition, 42% of the people who answered said they were spending less on groceries and other necessities.

Analysts at Capital Economics said that the 18-month “recession” in retail sales might be over because sales went up in the third quarter. In fact, the more normal weather in April may help sales pick up this month.

But it said that sales could still be slowed down if the Bank of England raises interest rates again at its next meeting in May, which would put more pressure on people to spend.

The Bank has been raising borrowing costs, now at 4.25 percent, to try to slow down inflation, which has been going up and up for a long time.

Prices will stop going up, say supermarkets.

Even though wholesale food prices have decreased worldwide, UK stores have not lowered their prices.

Last month, inflation was supposed to drop below 10%, but rising food prices caused it to drop less than expected.

Inflation dropped from 10.4% in February to 10.1% in March because food prices increased the fastest in 45 years.

Prices went up a lot for things like olive oil (by 49%), milk (by 38%), and ready-made meals (by 21%).

Campaigners say that poorer households are hurt the most by rising food prices because they spend a bigger share of their money on food.

Food prices have increased worldwide because of the war in Ukraine, but the UK has also had other problems, like Brexit red tape and a lack of workers.

This year, bad weather in other countries led to a shortage of some vegetables, which was made worse by the fact that UK farms are making less food because energy costs are increasing.

Farmers in the UK have also said supermarkets don’t pay them enough for their food, which the supermarkets reject.

Henry Dimbleby, who used to be the government’s food tsar, said that “fixed-price contracts” between supermarkets and their suppliers mean that when food is scarce, some makers choose to sell less to the UK and more to other countries in Europe.

The numbers come from the Office for National Statistics, whose top economist, Grant Fitzner, said that the agency did not make predictions. But he said it was “certainly possible” that food prices would stay the same for at least another month and that double-digit inflation would stay the same.

Inflation in the UK is still higher than in the US, Germany, France, and Italy, among other Western countries. However, on Wednesday, new numbers showed that inflation in the eurozone dropped from 8.5% to 6.9% last month.

Analysts at Capital Economics said that UK inflation “rose further and stayed higher than anywhere else because the UK has had the worst of both worlds: a big energy shock, like the eurozone, and labor shortages, even worse than the US.”

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It also said that UK energy prices are likely to go down quickly, but problems in the job market are likely to last until late 2024.

Jeremy Hunt, the chancellor, said that he was still sure that inflation would drop sharply by the end of the year.

Reference:

Rainfall washes out retail sales in March