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UK retail sales drop most since 2011 as inflation bites

London - UK retail sales fell the most since 2011 last quarter as consumers started to feel squeeze from faster inflation.

Retail sales dropped 0.7% from a year earlier on a like-for-like basis, the British Retail Consortium said on Tuesday, noting that the timing of the Easter holiday - which this year falls in April - may be distorting the numbers. Food sales declined 0.2%, their first decline since the period through August.

Prices are rising faster than wages in the UK, eroding shoppers’ real incomes. While economists predict data on Tuesday will show the inflation rate stayed the same in March from February, a report Wednesday is set to show wages growing at a slower pace.

“First impressions of March’s sales figures are underwhelming,” said BRC CEO Helen Dickinson. “The pressure on prices continues to build, albeit slowly, and will inevitably put a tighter squeeze on disposable income.”

Consumers have in part financed their spending, so far, by saving less and borrowing more, taking advantage of falling interest rates.

Separate data compiled by Barclaycard - which processes nearly half of the nation’s credit and debit card transactions - showed spending climbed 4.6% last month, boosted in part by higher prices of everyday goods including petrol and groceries.

While confidence among consumers rose, 52% said they were worried about the cost of day-to-day items and one-third said they plan to shop more at discount stores as prices climb.

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