UK retail sales post biggest quarterly fall since 2010 as inflation hits consumers

[LONDON] British retail sales posted the biggest quarterly fall in seven years during the first three months of 2017, as rising prices since last year's Brexit vote started to pressure consumers.

Retail sales volumes contracted 1.4 per cent in the first quarter following a 0.8 per cent rise in the last three months of 2016, the Office for National Statistics said on Friday.

That was the biggest quarterly fall since the first quarter of 2010, and is likely to reinforce the view among many economists that household spending - the main driver of the economy - is now slowing.

The ONS said retail sales were likely to shave around 0.1 percentage points off first quarter economic growth - the first negative contribution of the sector since the last quarter of 2010.

Retail sales volumes during March alone were worse than all forecasts in a Reuters poll of economists.

Sales volumes contracted 1.8 per cent, overturning a 1.7 per cent increase in February.

"This is the first time we've seen a quarterly decline since 2013, and it seems to be a consequence of price increases across a whole range of sectors," ONS statistician Kate Davies said.

The ONS' measure of retail prices rose 3.3 per cent in March compared with a year ago, the biggest such increase in five years.

Consumer prices are rising strongly, fuelled by rising energy costs and the pound's fall following last June's vote to leave the European Union.

Although British Prime Minister Theresa May pitched her surprise announcement of a June 8 national election as a chance to strengthen her hand in talks on separating from the European Union, the economic outlook will figure strongly in the political debate during the weeks ahead.

Moreover, the outlook for consumer spending is key for policymakers gauging the outlook for Britain's economy as it gears up to leave the European Union.

Reports from retailers themselves have been mixed. Associated British Foods' Primark discount fashion retailing arm traded well through Britain's Easter holiday period, the group's boss said on Wednesday, countering fears that British consumer demand was fading.

The ONS said there was no specific evidence to suggest the timing of the Easter holidays distorted the retail sales figures for March.

Year-on-year, retail sales growth slowed to 1.7 per cent in March from 3.7 per cent in February, compared with forecasts of 3.4 per cent growth.

REUTERS