Surprise leap in consumer spending in March
The ONS retail report, released today, confirms that retail sales have seen their largest year on year growth since October 2016. Sales (quantity bought) have increased by 6.7%, surprising many who expected to see a more cautious start to the year.
All categories of spend, apart from department stores and household goods, have seen an increase and overall against last quarter, spend is up by 1.6%. This is great news for the high street, especially on the back of a turbulent month politically in which Brexit continued to cause huge uncertainty as to whether the deal was on, off or delayed. History tells us that consumer confidence, and therefore spend, is in the main directly correlated to political and economic stability so this has been an unexpected but welcome bucking of the trend.
Additionally, as I referenced last month, the weather has had a significant impact on spending habits with sales boosted by the mild, spring-like weather we have experienced in recent weeks. This is in stark contrast with the remnants of the ‘beast from the east’ that continued to grip the nation this time last year. Online sales as a proportion of all retailing increased to 18.6% in March 2019, from the 18.1% reported in February 2019. This tallies with our observations of online taking up around 20% of all consumer spending and is a number that I believe will continue to increase over time.
Interestingly, the food stores category was the largest contributor towards the increase for the amount spent with a leap of 0.5%, perhaps showing that it is now experiencing a more stable and steady growth curve following the Christmas period. In the same space, the quantity of fuel bought remained the same whilst the amount spent increased minimally at 0.1%.
However, it’s not all great news. Department store sales have declined by 0.3%, hampered by ongoing problems for big names like Debenhams and House of Fraser. As these brands struggle to blend their online and offline strategies and grapple with the right customer experience strategies, we are seeing their financial security crumble and a hugely uncertain future ahead. The upturn in consumer spending seems to reflect a nation that is willing to put Brexit and all the uncertainty that it entails to one side and instead, to focus on a level of spending that is more in line with more immediate economic stability - a reduction in unemployment, an increase in wages and stead levels of inflation. Of course, with the protracted Easter holiday period. a series of bank holidays coming up and thoughts turning to getting the all-important family holiday booked, this could all change as funds get allocated away from the high street to more strategic purchases.
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