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Reluctance to spend now clear to see, BRC
08
Jun '11
UK retail sales values were 2.1% lower on a like-for-like basis from May 2010, when sales had risen 0.8%. On a total basis, sales were down 0.3%, against a 3.0% increase in May 2010.

As the weather cooled, consumers' underlying uncertainty about jobs and incomes resurfaced, hitting clothing, footwear and homewares. Big-ticket purchases suffered most and were often promotion-led.

Non-food non-store (internet, mail-order and phone) sales growth slowed in May, but the comparison was with a very strong May 2010. Sales were 10.4% higher than a year ago, compared with 13.7% in April but over 20% in May 2010.

Stephen Robertson, Director General, British Retail Consortium, said:
"After two previous months distorted by the later Easter and extra bank holiday, this is a more realistic reflection of how tough conditions on the high street really are.

"The first half of May was better than the second, when the weather turned unseasonably wet and cold in many parts of the country, but customers' fundamental reluctance to spend is now clear to see. Households' disposable incomes continue to be squeezed by uncomfortably high inflation and low wage growth, while uncertainty over the effects of Government cuts is hitting consumers' sentiment about future finances.

"The VAT rise since last year is flattering the sales figures for most non-food goods, while renewed weakness in the housing market made life particularly difficult for retailers selling furniture and household goods.

"This new evidence of weak spending shows how important it is to support this soft patch in the recovery by keeping interest rates low."

Helen Dickinson, Head of Retail, KPMG, said:
"For the first time in a number of months we have a clearer picture of the underlying trend without the distortions of the timings of Easter and bank holidays, and it doesn't make for happy reading. The last half of the month was the most challenging given the good weather and World Cup last year.

“Across the month, virtually all nonfood sectors experienced negative like-for-like sales to varying degrees reflecting consumer's reticence to spend as the disposable income squeeze tightens its grip. This, combined with falling margins driven by a greater focus on price, lower average transaction values and increasing manufacturing costs is leaving many retailers coping with a "double whammy" impact on cash flows."

British Retail Consortium

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