UK retail sales fall as consumer confidence drops

Consumer confidence in the UK has fallen with high energy and petrol prices taking their toll, along with the war in Ukraine. The fall in confidence has resulted in an unexpected drop in retail sales during February 2022.

Official data released by the Office for National Statistics (ONS) on Friday March 25^th shows that online shopping levels sank to below pre-pandemic levels. High street sales also fell during the month with the bad weather to blame as the UK was battered by storm after storm.

Actual sales volumes were down by 0.3% from January according to the ONS in contrast to a poll by Reuters that had economists predicting a 0.6 percent monthly rise in retail sales.

Sales volumes were 3.7 percent above their pre-coronavirus levels of February 2020 but the share of online sales in value terms was its lowest since March 2020 at 27.8 percent.

When compared with a year earlier, overall sales volumes were up by 7 percent, short of the 7.8 percent growth expected in the Reuters poll.

A forecast by Retail Economics suggested that the UK economy would grow by 5.2 percent in 2022, with retail sales growing by 2 percent. They have placed a caveat on that number saying that there a squeeze on incomes will see a drop in spending power. The factors that are contributing to the drop in spending power include:

• The point to a rise in National Insurance Contributions (NIC), a freeze on personal tax allowance and increasing inflation.
• A rise in the energy price cap and a NIC increase of 1.25 percentage points
• A 30-year high inflation rate of 5.4 percent that could go as high as 6 percent or more.
• The increase in interest rates, the first in over three years

Although UK consumer confidence is not expected to rise in the short term with the war in Ukraine playing heavily on European economies, retail sales fall are expected to be up in March due in part to the warmer weather.

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