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Published
Apr 21, 2017
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ONS blames inflation for low UK retail sales, fashion among stronger sectors

Published
Apr 21, 2017

Official UK retail sales statistics painted another gloomy picture on Friday morning but the fashion sector did not appear to be suffering as much as some others, although department stores have struggled, possibly hurt by this year’s later Easter.


Overall sales may have fallen in Q1 but fashion fared slightly better than other sectors



The Office for national Statistic (ONS) said that sales by volume fell 1.4% from January to March (Q1), which was disappointing after only a slim 0.8% rise in Q4 last year meant retailers had a lot riding on the post-Christmas/early spring season. It was the first fall since Q4 2013.

And in March alone, year-on-year, retail sales volume growth slowed down to 1.7% after hitting 3.7% in February and with analysts having expected a similar number last month.

The three-month drop further suggests that households are reining-in their spending on the back of rising prices and caution over the future as Brexit gets closer. That fall is also likely to have depressed Q1 economic growth, only by 0.1 percentage point, but the first dip in nearly seven years.

EASTER OR INFLATION?

So with retail sales volumes missing analysts’ forecasts, what actually happened in the quarter’s ‘problem month’, March? The ONS is convinced that it was all about rising prices with even Mother’s Day, with its surge in female-friendly products like beauty and fashion, failing to provide a boost.

And while retailers themselves have blamed the later Easter timing, saying much consumer spending was switched into April, the ONS said there was no specific evidence to suggest any Easter-linked distortion of the retail sales figures for March.

”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 body’s measure of retail prices was up 3.3% in March year-on-year, the biggest leap in five years, as energy prices and the weak pound combined to push inflation higher.

Whether the ONS is correct is open to question. A number of retailers have have offered up figures showing improvements in April and only this week John Lewis pointed to rising April/Easter sales as evidence of this.

FASHION STRENGTH

Despite an overall weak sales report, over the three-month period, the seasonally adjusted ONS figures showed specialist textile, clothing and footwear stores sales volumes up 1.9% compared to the previous quarter. And they were up 5.8% year-on-year. By the amount spent, those sales rose 2.5% quarter-on-quarter and 6.5% on the year, the larger rises suggesting higher prices are having an effect.

But volume department store sales dropped 2.4% compared to Q4 last year and 1.2% year-on-year. As far as the amount spent was concerned, those drops were 1.8% and 0.2%, respectively, again pointing to higher prices.

Non-store sales (ie online), fell 2.3% by volume compared to Q4, no surprise given the strength of e-tail for-Christmas shopping. But they rose 18.9% compared to Q1 last year, which could be good news for fashion stores as cloth gin and shoes are among the key categories to buy online. By value they managed to rise 0.5% compared to Q4 and 20.9% on the year.

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