Values and volumes remain disconnected as retail sales fall faster than expected

Retail sales volumes fell an estimated 0.9% in March, following a 1.1% rise in February
Sales values (excluding motor fuel) fell 0.6%, with volumes excluding motor fuels falling 1.0%
The month saw declines in both Food (down 0.7%) and non-food (down 1.3%) store sales
Strong months earlier in the year mean sales volumes rose 0.6% over the three months to the end of March, the first three month rise since August 2021
Retail sales had been expected to fall by 0.5% (Trading Economics)

Nicholas Hyett, Investment Analyst at Wealth Club, commented:

“The retailers surveyed by the ONS put the worse than expected slump in retail sales down to a combination of poor weather and the salad shortages of early March. That may be a contributing factor, but in the longer term we think inflation and the cost of living squeeze is the driving force.

Over the last two years, sales volumes have fallen 9.5%, but the pounds and pence value of those sales are up 6.9%. Shoppers are consistently spending more but getting less. Take motor fuel out of the picture and that’s true this month too.

This is the tearaway inflation of the last year at work, squeezing wallets even as consumption falls in real terms. The Bank of England is keen to get it under control, and will probably raise interest rates at least once more to get the job done. It’s a delicate balance though, raise rates too far, too fast spending could head south fast. That wouldn’t be good news for anyone.”