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Rising UK cost of living puts brakes on consumer spending

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UK retail sales fell in April as consumers tightened their belts in response to the cost of living crisis, new industry data shows.

Retail sales fell 0.3% year-over-year in April, the first decline in 15 months, from 3.1% growth in the previous month, according to figures compiled by advisory services KPMG with industry group British Retail Consortium.

“The rising cost of living is undermining consumer confidence and putting the brakes on consumer spending,” said BRC chief executive Helen Dickinson.

High-priced items have been hit hardest as consumers curb spending on furniture, electricity and other household items, she added. Spending on these items has also been hit by supply chain disruptions and delays in imports from China’s lockdown.

The annual comparison for April fell as many stores reopened last year, but rose as prices rose as the BRC data was not adjusted for inflation.

Given that inflation is at its highest rate in 30 years, the BRC said, “When inflation is taken into account, a small drop in sales masked a much larger drop in sales.”

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Compared to the pre-pandemic April 2019, retail sales rose 3.9%, a sharp slowdown from 5.4% growth in the previous month, and the lowest this year.

Official data show retail sales contracted in February and March as the cost of living crisis hit household incomes. Recent figures fuel economists’ concerns that economic growth will slow further in April and the rest of the year.

Economists expected little change in the UK economy in March, according to a Reuters poll, and last week the Bank of England warned of a risk of a recession in the next two years.

Consumer spending data tracked by Barclaycard, a payments company that monitors nearly half of all credit and debit card transactions in the UK, shows bearish growth in April in many sectors, even though the figures were not adjusted for inflation.

Spending on takeaway food, bars, pubs, clubs, and subscriptions to digital content such as Netflix and Amazon Prime has decreased.

However, both datasets report that some sectors performed better thanks to the resumption of international travel, improved weather and the upcoming Queen Elizabeth’s Platinum Jubilee.

Both data sets show that spending on clothing increased, and the BRC found that sales of garden supplies were stronger.

Barclaycard reports a significant improvement in spending on travel agencies and airlines, down 3.5% and 9.9%, respectively, compared to April 2019, a significant increase from the 10.7% and 12% declines in March.

Spending on hotels, resorts and accommodations also saw the fastest growth since September last year.

However, KPMG’s head of UK retail, Paul Martin, said: “The retail sector will have a tough time ahead as stores are facing soaring cost pressures from all directions.”

Video: How Seafood Restaurants Fight Inflation

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