Retail sales fall for second consecutive month - sharp drop in food sales looks 'suspicious', says ITEM Club

22 May 2013

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  • Today’s figures are quite a setback, with retail sales falling for the second consecutive month
  • But the sharp drop in food sales is difficult to explain and looks suspicious
  • We would be wary of drawing any firm conclusions and still expect the consumer sector to drive the recovery this year 

Mark Gregory, EY’s chief economist, comments on today’s retail sales figures:

“Today’s figures are quite a setback, with retail sales falling sharply for the second consecutive month. Sales volumes are now well below the Q1 average, implying that consumer spending may not be as strong as we have been hoping in Q2.”

Nida Ali, economic advisor to the EY ITEM Club, adds:

 “Delving deeper into the figures there are more questions than answers. Most sectors saw growth in sales volumes, with the sharp drop in overall sales being driven primarily by a 4.1% fall in the food sector. Such a large fall does not seem plausible for a sector where demand is so price and income inelastic. The ONS’s assertion that cold weather is causing a lack of demand for barbeque food can’t realistically explain more than a tiny part of the fall.

“We would be wary of drawing any firm conclusions just yet. A number of factors, including the large increase in income tax personal allowance and sustained strength in employment, suggest that the consumer sector can still play a major role in the recovery this year.”