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Inflation stats suggest difficult times ahead for retailers

Laura  Barnes
Inflation stats suggest difficult times ahead for retailers

The latest figures from the Office for National Statistics reveal that inflation continued to rise in May, placing UK consumers in a tricky position when it comes to managing their budget and buying non-essential items.

The Consumer Price Inflation report for May shows that housing costs grew by 2.7% on the same month in the previous year, up from the 2.6% growth in April. Excluding housing costs, CPI inflation grew by 2.9% on the previous year.

The British Retail Consortium (BRC) commented on these latest stats, saying the increase is ahead of most expectations, reporting that: “In May, the Bank of England predicted CPI inflation would rise by 2.7% over the second quarter of 2017. Given that the rate has accelerated to 2.9% in May from 2.7% in April, this forecast is under threat: inflation is unlikely to fall significantly, or at all, next month.”

While the inflation rates on their own may not seem too drastic, after the BRC placed them alongside the average weekly earnings growth, the increase in inflation “forms a worrying picture” as the consortium puts it.
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WAGE GAP

Looking at the latest Labour Market Statistics, the average weekly regular wage (which excludes bonus payments) grew 2.1% in the three months to April. This figure is a deceleration on the previous three months, when wages grew 3.2%.

“Regular pay is now growing at a far slower rate than prices are, which can only mean difficult times ahead for retailers,” warned the BRC.

Retailers have not had it easy over the past couple of months. May’s BRC and Springboard footfall and vacancies monitor revealed a fall of 1.0% in the UK, the first decline since February. For the high street alone, footfall declined by 2.0% in May – the steepest decline since June 2016. Read more about these figures here.

While BRC suggests this decline was largely due to poor weather, the comedown after the Easter rush, and even an uncertain political and economic climate, looking further into the latest inflation stats reveals another element to the picture of why shoppers are being more selective with their purchases.

FOOD FIGHT

“Inflation continues to follow the upward path we’ve seen since the end of last year. The story remains much the same – food has become more expensive and continues to do so, inflation accelerating to a growth rate of 2.1 per cent on May 2016, while costs increases for other items are beginning to creep through,” commented the BRC.

The BRC-Nielsen Shop Price Index has recorded rising food prices for four consecutive months, with May seeing food prices rise at their fastest rate since January 2014.

“With shoppers forced to spend more on their food and drink, the amount they have left to spend on discretionary items is being sapped,” said BRC.

“This helps explain the slowdown in retail sales, and in household consumption growth, which fuelled UK growth as a whole in the second half of 2016.

“With such conditions likely to continue, retailers are in for a tricky few months.”

Tags: Retail , brc , inflation , ONS

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