Retail sales in Great Britain fell by more than expected last month as the soaring prices of food and fuel caused consumers to rein in their spending amid growing fears over the cost of living.
Figures from the Office for National Statistics (ONS) showed retail sales volumes dropped by 1.4% in March, after a decline of 0.5% a month earlier as shoppers adjusted to rising costs. City economists had forecast a drop of 0.3%.
Darren Morgan, a director of economic statistics at the ONS, said: “Retail sales fell back notably in March, with rises in the cost of living hitting consumers’ spending. Online sales were hit particularly hard due to lower levels of discretionary spending.”
Spending on food fell for the fifth consecutive month as supermarkets reported a sharp drop in sales alongside declines for butchers and bakers, as well as an 11.3% fall in spending at alcohol and tobacco stores.
The ONS said some of the drop in spending could be explained by consumers returning to pubs and restaurants after the easing of pandemic restrictions, although it warned the impact of rising food prices on the cost of living was also hurting retail sales.
Fears for a marked slowdown in consumer spending have intensified in recent weeks, with surveys showing the public has grown gloomier about the economy than when banks were on the brink of collapse during the 2008 financial crisis. Figures from the ONS show 87% of adults reported a rise in living costs in late March, compared with 62% in November.
Against a backdrop of soaring global energy prices and rising cost of a weekly shop, inflation reached 7% in March – the highest level since 1992 – and is forecast to rise further this month after a record increase in household gas and electricity prices. The Bank of England has warned the measure for the rising cost of living could hit 10% later this year, the highest level since the early 1980s.
With prices for petrol and diesel hitting a record high last month as the Russia-Ukraine war ripples through global oil and gas markets, fuel sales across Great Britain fell 3.8% in March as households cut back on non-essential travel.
The ONS said online spending fell to 26% as a proportion of total sales – the lowest since February 2020, immediately before the Covid-19 pandemic spread – with consumers returning to shopping on the high street and as families cut back on non-essentials.
Online sales soared during lockdown, hitting a peak of 37.1% in February 2021. Although expected to fall back as the economy reopened, spending remains much higher than before the pandemic, when online retail accounted for about a fifth of overall sales.