The real reason behind increase in retail sales last month as shoppers remain ‘tepid’ amid Iran war
Consumer spending on non-food items remained “moderate” in March as shoppers turned more cautious amid ongoing conflict in the Middle East, new figures show.
Data from the British Retail Consortium (BRC) and KPMG show non-food sales rose a modest 0.9% year-on-year last month, falling short of the 12-month average of 1.1%.
This weak performance was further highlighted by online non-food sales growing by just 0.1%, well below the 1% annual average, indicating a decline in consumer confidence.
While overall UK retail sales rose 3.6% from a year ago, exceeding the 12-month average of 2.6%, this was largely attributed to early Easter and inflation pressures. Food sales increased by 6.8%, an artificial increase that distorted total retail figures.
Demand was seen to be strong for categories such as computers, toys and household goods. However, the clothing and footwear industries continued to face difficulties. Additionally, uncertainty regarding international travel due to the situation in the Middle East has negatively impacted sales of travel-related products.
BRC chief executive Helen Dickinson said: “Early Easter provided a much-needed boost to food sales as families came together over the long weekend.
“Retailers hope a ceasefire in the Middle East will bring lasting stability, but the outlook remains uncertain.
“There has already been damage to supply chains and rising costs, from transport and fertilisers, to insurance and commodities, are putting further pressure on already struggling retailers.
“The government must act decisively and boldly now to curb inflation by postponing domestic policies that would drive prices even higher for shoppers.”
Linda Ellett, KPMG UK Consumer, Retail and Leisure Director, said: “Food and drink continues to drive monthly retail sales growth, with inflation also a key factor.
“Growth in non-food sales has been moderate at less than 1% so far this year, as consumer spending wariness is fueled by the current and potential impact of the conflict in the Middle East.”
Separate figures from Barclays show travel spending fell 3.3% in March after five years of growth, as overseas trips were postponed or replaced with accommodation.
The bank’s data shows consumer card spending rose 0.9% annually, down from 1% in February.
With the increase in fuel prices, essential expenditures returned to growth with an increase of 0.5 percent for the first time since July last year, while discretionary expenditure growth slowed to 1.1 percent for the first time since 2021 due to the decline in travel.
But a survey for Barclays found that overall consumer resilience remains strong, with 71% of UK adults feeling confident they can live within their means each month.
In response to uncertainty surrounding the Middle East conflict, 14% said they were postponing major purchases or financial decisions, while the same proportion said they were creating a savings buffer in case costs rise.
Approximately 74% of respondents predict that ongoing tensions will continue to impact the cost of living for the remainder of the year.
Jack Meaning, Barclays’ chief UK economist, said: “The fact that shoppers are delaying major purchases and building a savings buffer in response to the shock from the Middle East strengthens our view that activity will stall in the coming months.
“With an interest rate decision due in less than three weeks, the Bank of England will need to consider how to balance this softening economy with inflation already taking hold.
“Our modeling shows that this balance is best achieved by keeping rates steady, containing the worst of inflation without unnecessarily squeezing consumers.”
Opinium surveyed 2,000 British adults between 27-31 March.
