Inflation impact

Shop sales fall as consumers cut back on food

David Lonsdale
David Lonsdale: welcomed Glasgow voucher scheme (pic: Terry Murden)

Retail sales volumes fell by 0.5% in May as consumers cut back on their food shopping.

New figures from the Office for National Statistics are a fresh indication of the impact of surging inflation.

The ONS now estimates that sales volumes in April rose by 0.4% from March, a much smaller increase than the originally reported 1.4% increase.

Economists polled by Reuters had expected a 0.7% monthly fall in retail sales in May.

Heather Bovill, deputy director for surveys and economic indicators at the ONS, said a decline in food sales was behind the May figure.

“Feedback from supermarkets suggested customers were spending less on their food shop, because of the rising cost of living,” she said.

Martin Beck, chief economic advisor to the EY ITEM Club, says he expects the second half of 2022 to be a challenging period for retailers, with consumer spending power under significant pressure from very high inflation and personal tax rises, and with confidence continuing to decline.

“This morning’s GfK survey reported that sentiment reached a new record low in June. The retail sector is effectively already in recession, and the wider consumer sector is likely to experience a marked slowdown this year,” he said.

The Scottish Retail Consortium (SRC) has praised Glasgow City Council’s plans for a £9 million shopper stimulus scheme as a means of aiding lower income households and the city’s retailers.

Glasgow’s shopper footfall in May was 12% lower than the comparable period prior to Covid. 

The SRC believes that a retail voucher or high street stimulus scheme should be considered for elsewhere in Scotland, as a means of re-igniting consumer spending and transactions. Northern Ireland and Jersey introduced voucher schemes in the second half of last year to pep up their economies emerging from Covid.

The Glasgow scheme is aimed at benefitting 85,000 households this summer by providing them with a £105 voucher or gift card. 

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David Lonsdale, director of the Scottish Retail Consortium, said: “This is a bold and imaginative plan from Glasgow city council to help less well-off households and give a much needed shot in the arm to the city’s consumer-facing economy.

” It has been a difficult two years for retail destinations which have been left reeling by the impact of the pandemic, associated government restrictions and economic uncertainty.

“Shops will only survive with the patronage of the public and questions remain over what demand will look like for the remainder of the year given the cost of living crunch.

“This shopper stimulus scheme should boost retail in the city and may even trigger additional spending by shoppers beyond the value of the voucher transaction, creating an even larger economic multiplier.”

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