Consumer demand continues to be squeezed by cost-of-living crunch

interactive investor comments on British Retail Consortium like-for-like retail sales.

Key points

• Retail sales across the UK dropped 1.5% in May as the cost of living crunch hampered demand, according to the British Retail Consortium.
• Online sales decreased by 8.5% during May, compared with a decline of 8.1% in May 2021.
• Total UK footfall increased by 6.9% over the Jubilee weekend, compared with the average for May 2022.  

Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “Runaway inflation continues to dampen consumer demand and hamper retail sales. For many workers, rising prices have decimated any uplift in wages - which has in turn compromised their spending power.

“Shoppers face hard choices over how to spend their money amid the cost-of-living crisis. More and more consumers are having to stretch their budgets to keep on top of rising prices, with little to spare for nice-to-have quality of life boosting purchases. Many feel that now is not the best time to make big purchases, illustrated by a fall in spending on furniture, home appliances and computing items last month.

“However, sales of fashion and beauty products were strong in May, with the summer holiday and social season rapidly approaching. The Platinum Jubilee celebrations, supported by sunny and warm weather over the bumper four-day Bank Holiday weekend, gave UK high streets a much-needed lift as shopper footfall surged.

“The hope now for retailers is this will create momentum, along with the summer feel-good factor, to bolster sales despite the raging cost-of-living storm. But the outlook for consumer confidence remains bleak with inflation predicted to hit double digits, while the revision of the energy price cap in the autumn is expected to add an additional £800 a year on to the typical energy bill.

“Keeping tabs on your spending remains crucial.”