Experian: UK Retail Sales Alert – May 2020 Release
Guest Post – Michella Cha – Head of Sales – Market Intelligence at Experian: Today’s figures published by the Office for National Statistics showed that retail sales plunged in April. Sales volumes contracted by a record 18.1% over the previous month. When comparing the three months to April with the previous 3 months, sales fell by 8.6%.
On an annual-basis, overall sales fell by 9.2% in April, the sharpest drop ever recorded. The bulk of the effects of lockdown were in play over this time period, with many businesses having completely ceased trading over the entirety of the month. Hence, these figures, to some extent, are largely unsurprising.
Most categories saw sharp declines, with sales of automotive fuel, in particular, dropping by a precipitous 52% over the previous month, a result of the considerably lower vehicular traffic on the streets of Britain and subsequently lower demand for fuel. As much of the stockpiling seen in March started to unwind in April, sales in predominantly food stores also contracted, though by a considerably milder 4.1%, when compared to the preceding month.
A notable category seeing an increase over the previous month was non-store retailing, which saw a record expansion of 18% as consumers switched to doing their shopping online. Indeed, online sales comprised close to a third (30.7%) of overall retailing, hitting a new all-time high. Within this, online food sales grew by 55.8%.
The fall in retail sales in April supports our view that the contraction in consumer spending this quarter will exceed 20%. The drop is largely driven by the closure of non-essential retail during the lockdown period and the recovery path will be closely tied to the pace at which these restrictions are unwound. Our baseline projections assume only a gradual easing over the coming months which will keep spending subdued in the near term.
Alongside this, the performance of household incomes will also be a key driver on how durable the recovery will be when it finally emerges. Incomes will suffer a squeeze in the months ahead from a combination of a sharp rise in unemployment, furloughed workers and weakening wages. Our baseline assumes both incomes and spending return to recovery later this year, but the risks to this outlook remain weighted to the downside.
Please contact us if you are interested in alternative scenarios that explore different trajectories for the economy, household incomes and spending.
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