‘Financial reality’ hits as rising costs leave shoppers unable to make discretionary purchases
- Credit: PA
Shoppers were dealing with the 'financial reality' of their budgets being eaten up by essential spending in February, leaving less cash for discretionary purchases, a report has found.
Figures from the British Retail Consortium (BRC) and KPMG showed that in February, UK like-for-like retail sales increased by 0.6% year-on-year, compared with a 0.4% decrease in February 2017.
On a total basis, sales rose 1.6% in February, against a growth of 0.4% in February 2017.
Those behind the report said the 1.6% increase is 'quite an achievement' in testing times.
Helen Dickinson, chief executive of the BRC, said inflation is still eating into shoppers' budgets, pushing them to spend a greater share of their income on essentials and leaving less left over to buy discretionary, predominantly non-food items.
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At the same time, weak growth in household earnings is keeping overall sales low, she said.
She continued: 'There's little sign that consumer confidence, rather than financial reality, has much to do with the current weakness in spending.
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'Furniture, often considered the bellwether of consumer confidence, actually saw sales improve in February as shoppers took advantage of credit facilities offered by retailers.
'The fact is that consumers want to spend, they just don't have the resources to do so.'
Paul Martin, head of retail, KPMG, said retailers experiencing any growth in this environment will be counting themselves lucky.
He continued: 'Indeed, total growth of 1.6% in February is quite an achievement in such testing times.
'Softening consumer demand, rising costs for retailers and of course the ongoing structural changes within the industry are creating the perfect storm which is uprooting the weakest players.
'On the high street, it was grocery sales that continued to pull it out of the bag.
'Meanwhile, Shrove Tuesday may have resulted in an uptick in cooking accessory sales, but performance in non-food in general was once again disappointing.'
He said retailers with a large presence of physical stores are particularly under pressure.
Mr Martin said that while it was 'not all doom and gloom', the cost of 'one of the coldest winters on record has yet to be factored in'.
Meanwhile, figures from Barclaycard, which processes nearly half of the nation's credit and debit card transactions, show consumer spending grew 3.8% year-on-year in February.
Travel spending jumped 7.4% year-on-year - the highest level seen since December 2016, driven by a strong increase in spending on airlines, Barclaycard said.
Entertainment also performed strongly in February, bolstered by a 7.4% annual increase in cinema and theatre spending as Black Panther and Hamilton boosted Britain's box offices, Barclaycard said.