(Bloomberg) — UK consumers are tightening their belts in the face of soaring inflation, with retailers warning that the cost of living crisis has punctured the post-pandemic spending boom.
Sales decreased 1.1% last month compared with a year earlier, the British Retail Consortium said Tuesday, with big-ticket items such as furniture and electronics hit hardest by the cutbacks. A separate report from Barclaycard showed consumers are cutting down on luxuries such as digital subscriptions and dining out.
The figures are the latest sign that rampant inflation, which hit a 40-year high of 9% in April, is taking its toll on shoppers and threatening to heap more misery on retailers after a torrid few years.
With consumer spending a key driver of the economy, they also will increase concerns that Britain is heading for a recession, even after the government provided more help with soaring energy bills.
Worryingly, the BRC records the value of sales rather than volumes, meaning stores are taking less money at the tills and online, despite surging prices.
“It is clear the post-pandemic spending bubble has burst, with retailers facing tougher trading conditions, falling consumer confidence, and soaring inflation impacting consumers spending power,” said the BRC’s chief executive Helen Dickinson. “Supply chain issues including rising commodity and transport costs, a tight labor market and higher energy bills are forcing retailers to increase their prices, contributing to wider inflation.”
Barclaycard found card spending rose 9.3% in May from a year earlier, a figure that was inflated by the sharp increase in prices. Spending on energy and fuel increased 34.5% and 24.8% respectively, while outlays at supermarkets fell 2% and spending on digital content and subscriptions fell 5.7%.
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