UK retail sales fell 1.8 per cent in March and 1.4 per cent quarter-on-quarter – the worst performance in seven years.
The figures indicate consumers, who have been a strong contributor to the UK economy following the Brexit referendum, are reigning in their spending as inflation starts to bite.
IHS Markit chief economist for the UK and Europe Howard Archer says the results cement their belief that GDP growth will fall to 0.4 per cent in Q1 compared to 0.7 per cent in the last quarter of 2016.
“This is a really dire retail sales performance – there is no other word for it – even allowing for the possibility that the later Easter this year pulled some sales back to April from March,” Archer says.
Non-food sales fell 2.4 per cent in March indicating consumers were limiting discretionary spending.
Archer adds: “Markedly faltering consumer spending is particularly significant as the economy’s resilience through the second half of last year after June’s Brexit vote was largely built on consumers keeping on spending.
The figures reinforces IHS Markit’s view that the Bank of England will not raise interest rates anytime soon.
Archer says: “We expect the Bank of England to sit tight through 2017 and 2018, and very possibly for some time beyond then – much will depend on how the Brexit negotiations develop.”