Retail sales slip in May as shoppers turn cautious, but spend more on leisure

Retail sales slipped back in May and online trading growth hit record lows as shoppers turned more cautious in the face of rising inflation, new figures have revealed.

Like-for-like sales were down by 0.4% last month - down from the 0.5% growth during the same period last year and falling back from the sales boost the sector enjoyed over the Easter break.

The latest data from the British Retail Consortium (BRC) and KPMG also showed growth in online sales of non-food products slumped to the lowest level since records began in 2012, adding 4.3% last month compared to a 13.7% spike in 2016.

However, food and drink sales growth was at its highest in more than five years at 3.2% for the three months to May, boosted by the warm weather in the run-up to the May bank holiday.

Separate figures from Barclaycard showed consumer spending growth had fallen to a 10-month low of 2.8% in May.

However, they also revealed that shoppers spent more money on experiences than goods.

Spending on entertainment rose 12%, driven by double-digit growth in cinemas (11.5%) and restaurants (11.7%).

But shoppers cut back their spending by 2.9% on household goods and clothing.

The gloomy environment for retailers was illustrated by annual results from New Look - showing profits down 41% in the year to 25 March as UK like-for-like sales dropped 6.8% amid "challenging" trading.

However upmarket clothing brand Joules bucked the trend as revenues for the year to 28 May rose 19.6%, helped by the fall in the pound boosting sales internationally as overseas customers sought out bargains.

The tough times facing UK retailers come amid rising inflation, which climbed to 2.7% in April - its highest level for nearly four years - with the squeeze on household budgets intensifying at a time when wage growth is stuttering.

In real terms - taking into account inflation - wages fell by 0.2% in the first three months of 2017, the first time there has been a decline for two-and-a-half years.

Paul Martin, UK head of retail at KPMG, said: "With inflation continuing to rise and wage growth stagnating, consumers are starting to feel the pinch.

"Many retailers, particularly fashion stores, will be poised and ready to make the most of the upcoming summer, so hopefully the weather will play fair."

BRC chief executive Helen Dickinson added: "Food sales, albeit positively distorted by inflation, continue to see annual growth, while in non-food categories, which are predominantly capturing discretionary spending, retailers find themselves having to compete even harder."

Paul Lockstone, managing director at Barclaycard, said: "In May we witnessed the resilience of the 'experience economy' and all signs indicate spending on leisure time will continue to be a priority."