As if we needed any more difficult economic news to swallow, retail figures released by the Office for National Statistics show that volumes fell 2.3% in April compared with March, the biggest drop since January 2010, and a much bigger drop than was expected.
The year-on-year figures are not quite so bad: volumes were down 1.1% on the previous April, but this is disappointing given that economists were forecasting an annual rise of 1%. Furthermore, in March we saw a month-on-month increase of 2% that many were hoping would be a sign of prosperity starting to return to the high street: alas March’s growth has been more than reversed.
The ONS says that the month-on-month slump was largely caused by petrol stations being unable to stock up on fuel in time for April after the public emptied stations in March’s panic buying episode. The figures also point to sliding sales volumes in footwear and clothing, whose month-on-month fall was the most severe since June 2008. As MT reported yesterday, wages increases are still failing to keep pace with inflation, leaving consumers more and more reluctant to spend.
In some senses however, things are looking up: inflation actually fell according to yesterday’s figures, from 3.5% to 3%, just about in the safe zone in which Mervyn King is not required to explain the reasons for inflation to the Chancellor.
But today’s figures are not indicative of a slump for all retailers: luxury fashion brand Burberry reported a 24% increase in profits to £336m, with sales also up 24% to £1.86bn. Burberry is in the middle of an expansion plan in emerging markets where luxury goods are sensationally popular, and notably, these markets accounted for 37% of the company’s revenues. Not necessarily a reflection on the UK retail space, but proof nonetheless that it is possible for the British retailer to grow, even operating from within the confines of the UK’s economic straitjacket.
We think that if the ONS worked its figures on the ‘underlying profits’ mentality of most listed companies these days, the picture might look a bit rosier. The run on petrol stations was certainly exceptional, so what exactly was the ‘underlying’ sales volume on the high street and in supermarkets? Hard to tell, but next month’s figures (especially with that reduced inflation) could make interesting reading…