Comment on ONS March retail sales data from Andy Lyon, Leader of PwC’s retail and consumer practice in the Midlands
“With snow and rain right through March including in the critical run up to Easter, it’s no surprise that shoppers avoided the high street. So, while online retailers benefited to some extent, last month’s retail sales were particularly disappointing.
“Footfall was significantly impacted by the weather, and the first of retailers’ spring/summer fashion and home product ranges would have been of little consolation to shoppers looking to stay warm.
“But, it’s not all doom and gloom. This week’s mini heatwave will likely provide a welcome boost to retailers as consumers seek spring/summer clothing and outdoor items such as garden furniture. And we’ve already seen evidence of wages growing in real terms as inflation has eased. Moreover, our most recent survey* shows that consumer sentiment is recovering and is higher than it was both in December and this time last year. This is particularly true of younger people, with more under 45s saying they think they’ll be better off next year.
“While many retailers currently face the twin challenges of muted demand and higher costs, we believe the sector may have turned a corner. We expect to see more positive retail sales in the coming months, as the weather improves and shoppers begin to loosen their purse strings. In addition, if the strengthening pound is sustained, it is likely to reduce pressure on retail margins later in the year.
“In the short term, we expect grocery will continue to be a priority for shoppers, with almost a third of consumers telling us they’ll spend more on this category in the coming year. However, even in areas where shoppers plan to cut back, such as clothing and eating out, the majority of consumers tell us they expect to resume spending after this year.
“A potential cloud on the horizon is an increase in interest rates. While we expect any increase to be small, it will have a material effect on the spending power of some consumers. This is reflected in the results of our consumer sentiment survey which shows that 45-54 year olds, who are most likely to be mortgage holders, are the most pessimistic age group in terms of their disposable income.”