Retail sales data, February 2017 - PwC comments

Published at 10:23 AM on 17 February 2017

In response to the latest retail sales data, Andrew Sentance, senior economic adviser at PwC, commented:

“These figures provide the clearest evidence yet that rising prices will squeeze consumer spending throughout this year and into 2018. A sharp turnaround in the inflation environment has put a sharp brake on the growth of retail spending - and we are likely to see more of the same as we move through 2017 and next year.

“In 2015 and the first half of last year, falling prices on the high street and at the petrol pump boosted the volume of retail spending. Shop and motor fuel prices were falling by 2.5% to 3% a year over this period and this supported 4.5%-5% growth in the volume of retail sales.

“By contrast, this January we have seen a rise in prices in the retail sector - which are now nearly 2% up on a year ago. Not surprisingly this change in the inflationary trend has squeezed the growth in the volume of retail spending to just 1.5% compared with last year.

“As we saw in the early 2010s, it is hard for retailers and other consumer businesses to achieve high volume growth when inflation is high and wages are not rising to compensate. This is the pattern we should expect to see repeated in 2017 and 2018.”

Commenting on the impact for retailers, Stephanie Bloor, retail & consumer director at PwC said:

"Following the positive trading results at Christmas, this month’s retail figures show a decline in sales. However, January has never traditionally been a good month for retailers, particular in the food and grocery sector. We would expect sales to be more upbeat next month.

"Many are predicting 2017 to be a tough year for retailers, with the recent falls in sterling expected to push up inflation and as a result put a squeeze on household spending. Couple this with the higher product import costs, rising employee costs and in certain cases higher business rates and companies could feel some pressure.

"Hopefully, February will provide some love to the retail industry, particular from Valentine's Day where results from a recent PwC survey estimated that over £450m would be spent by UK consumers this year."

Ends.

For further information please contact Tilly Parke: tilly.parke@pwc.com / +44 20 7804 8761


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