U.K. Retail Sales Drop in March as Inflation Hits Consumers


But retail sales fell sharply in the first three months of the year, that was the first quarterly decline since 2013.

Crucially, the rate of inflation grew faster than average wages, which increased by just 2.2% last month, meaning households' budgets could be squeezed even further in the foreseeable future.

That total accounts for 15.5% of all retail spending, excluding fuel, during the month, and contrasts with 13.6% a year ago, according to today's Office for National Statistics' Retail Sales report for March 2017.

Richard Lim, chief executive at Retail Economics said: "This latest data shows that the surge in inflation is putting retailers under intense pressure with the first quarterly decline in retail sales since 2013". However, despite overall retail sales decreasing we have seen an increased demand for larger purchase items for outdoor activities driven by a mild March.

Scotiabank's Alan Clarke said: "Slower wage inflation, coupled with slower consumer spending growth are two of the three swing factors that the MPC minutes told us would have an influence on monetary policy".

Year-on-year, retail sales growth slowed to 1.7 per cent in March from 3.7 per cent in February, compared with forecasts of 3.4 per cent growth.

"This is the first time we've seen a quarterly decline since 2013, and it seems to be a outcome of price increases across a whole range of sectors", ONS statistician Kate Davies said.

More news: Europa final would be 'perfect' end to season, says Mourinho

Meanwhile the fall in sterling since the European Union referendum has raised inflation to a 2.3 per cent annual rate in the United Kingdom, as imports become more expensive. May highlighted the U.K.'s surprising economic strength in the wake of the U.K.'s vote to leave the European Union, saying growth has "exceeded all expectations" since Britons chose to leave the bloc in June a year ago.

Receipts from the sale of building materials increased by 9 per cent year on year.

ING's senior United Kingdom economist James Knightley called the figures "dreadful".

The ONS said there was no specific evidence to suggest the timing of the Easter holidays distorted the retail sales figures for March.

Consumers have been plundering their nest eggs, or spending more on credit, to maintain their standard of living in the face of rising inflation.

"Worryingly for United Kingdom growth prospects, the fundamentals for consumers look highly likely to see further deterioration over the coming months as rising inflation eats further into purchasing power with the squeeze reinforced by muted earnings growth", he said.

There were some bright spots in the ONS figures, with the amount spent on textiles, clothing and footwear up by 2.5% from the preceding quarter.