‘Dismal’ month for supermarkets pushes down retail sales

Nick EdserBusiness reporter, BBC NewsGetty ImagesA “dismal” month for supermarkets led to retail gross sales falling in Could on the quickest tempo for greater than a yr, official figures present.Gross sales volumes dropped 2.7% in Could, the most important month-to-month fall since December 2023, in line with the Workplace for Nationwide Statistics (ONS).Meals retailers noticed decrease gross sales of alcohol and tobacco as households reduce, whereas clothes and family items shops reported “gradual buying and selling”, the ONS mentioned.Separate figures on the UK economic system confirmed that authorities borrowing rose final month, hitting the second highest degree for Could since month-to-month information started in 1993.Borrowing – the distinction between spending and tax earnings – was £17.7bn, up £0.7bn from Could final yr.The ONS mentioned income from earnings tax and Nationwide Insurance coverage contributions rose, however spending noticed an even bigger enhance, partly resulting from inflation-linked uplifts to many advantages.Shoppers slicing backMay’s fall in retail gross sales adopted a 1.3% rise in April, when demand was boosted by sunny climate.ONS senior statistician Hannah Finselbach mentioned the weak efficiency in Could was “primarily resulting from a dismal month for meals retailers, particularly supermarkets, following robust gross sales in April”.”Suggestions recommended lowered purchases for alcohol and tobacco with prospects selecting to make cutbacks.”The ONS additionally mentioned demand for DIY items had fallen final month, as shops reported that buyers had accomplished dwelling tasks sooner than common this yr due to the great climate. Gross sales volumes within the three months to Could had been nonetheless up by 0.8% in comparison with the earlier three months, which is seen as a greater information to underlying traits.Nonetheless, Paul Dales, chief UK economist at Capital Economics, mentioned the info added to “different proof that the burst of financial development” within the early a part of the yr “is over”.The UK’s economic system grew by 0.7% within the first three months of the yr, however newest figures present it contracted by 0.3% in April.He mentioned a few of Could’s decline in retail gross sales was as a result of enhance in April from the nice and cozy climate fading, however “the ONS additionally mentioned retailers famous inflation was prompting shoppers to chop again”.Jacqueline Windsor, head of retail at PwC UK, mentioned: “The truth that retail gross sales fell again in Could was not a shock given the unusually robust efficiency the earlier month.”Nonetheless, it does underline the fragility of shoppers’ spending energy and the retail sector within the present financial local weather.”The newest figures on the general public funds present that the federal government has now borrowed £37.7bn within the first two months of the monetary yr.That’s lower than the £40.7bn that the federal government’s unbiased forecaster, the Workplace for Finances Duty, had predicted on the time of the Spring Assertion in March.Responding to the most recent information, Darren Jones, Chief Secretary to the Treasury, mentioned the federal government had “stabilised the economic system and the general public funds; now we have to be certain that the British economic system delivers for working folks”.Thomas Pugh, an economist at tax and consulting agency RSM UK, mentioned the truth that borrowing this yr was beneath the OBR’s forecast would give Chancellor Rachel Reeves “one thing to cheer”.Nonetheless, he added {that a} mixture of an underperforming economic system, increased borrowing prices and U-turns on welfare spending meant the chancellor “will most likely must announce some top-up tax will increase after the summer time” if she is to satisfy her self-imposed guidelines on spending and borrowing.