Retail sales volumes stalled in February, with the Office for National Statistics estimating that the quantity of products bought was flat at 0.0%, following an increase of 3.6% in January 2024.
ONS did see growth in clothing sales, as people invested in the new season’s collections. There was also an uplift in department stores. However, these were offset by a reduction in food and fuel sales, possibly caused by rising prices.
Additionally, ONS reported that many stores had been hit by the wet weather, while online saw a boost.
Natalie Ormond, owner of ethical gift store Smallkind, said: “Being a small retailer right now is awful. The cost of every single service we use has gone up and the money coming in is way down. As a company stocking sustainable brands, I am really worried. People generally equate sustainable with expensive, which is usually not true, and right now it feels like only fast and cheap products are selling. It’s really tough out there.”
Jacqui Baker, head of retail at RSM UK, noted: “Many retailers are still feeling the strain and will feel the UK chancellor missed an opportunity to support the industry in the recent Spring Budget. The upcoming increase in national minimum wage and business rates will only add to the current burden.
“Despite headwinds there are reasons to feel optimistic. With the latest National Insurance cut, energy prices set to fall further in April and inflation getting back on track, the hope is that this will give consumers’ the confidence to go out and spend more. Plus, with new season stock continuing to land, retailers can hopefully put an end to the prolonged discounting and focus on making back some margin.”
Asif Aziz, EE’s Retail Director, commented: “Despite entering a recession at the end of 2023, there have been signs that the economy is bouncing back. Consumer confidence is rising, and after January’s jump in retail sales, February’s figures are encouraging, if not as strong as many had hoped for.
“Slower growth shouldn’t stop retailers from innovating – in fact, it is even more important to listen to customers and invest in new ways of being relevant, accessible, or entertaining for them.”
Phil Monkhouse, UK country manager at global financial services firm Ebury, added: “With dampened and unpredictable consumer demand seemingly becoming the ‘new-normal’ in an uncertain economic environment, retailers will find today’s data a disappointing reminder that volatility is not yet behind us.
“Retailers will hope that Spring weather begins to warm consumer spending but preparation will be critical. With geopolitical tensions and supply chain issues back on the agenda, those importing goods will need to ensure they are properly hedging against risk and have ready access to finance to build operational resilience.”
There may also be some light at the end of tunnel with inflation slowing to its lowest in two years. ONS reported earlier this week that the Consumer Prices Index (CPI) was 3.4% in February, down from 4.0% in January. While prices are still increasing, it is at a slower pace and this latest deceleration means the cost-of-living is rising at its slowest rate since September 2021 -when it stood at 3.1%.
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