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UK retail sales suffered the sharpest decline in May in 18 months as consumers cut their purchases of food and household goods.
The National Bureau of Statistics figures on Friday fell 2.7% last month, below the 0.5% decline forecast by economists voted by Reuters and the largest monthly fall forecast since December 2023.
The May drop saw a 2.5% drop in household goods as grocer sales fell by 5% and shoppers pulled back.
The monthly fall was the first of the year, and after an increase of 1.3% in April, retailers said they suffered from unusually sunny weather. Overall retail sales fell 1.3% in May compared to the same month last year.
But the economists said the first official economic data in May came amid an increase in indications that the economy is cooling after growing 0.7% in the first quarter.
Pauldales, an economist at Consultant Capital Economics, said, “The sharp decline in retail sales adds to other evidence that the first quarter economic growth explosion has ended.”
The decline in retail sales comes as the public sector inflation-driven increases pay higher tax receipts as separate figures released by ONS on Friday showed the UK government borrowed more than expected in May.
The borrowing was £17.7 billion last month, surpassing the office’s £17.1 billion forecast for budget responsibility, an increase of £700 million from the UK’s official fiscal watchdog, and the same month last year.
Public sector spending rose £6.4 billion in May compared to the same month last year, according to ONS. This increase offset a £5.7 billion increase in tax revenue that month. This was driven in part by an increase in employers’ national insurance contributions by £1.8 billion.
The increase in employer NICS was announced by Prime Minister Rachel Reeves in the October budget and came into effect in April.
However, the difference between borrowing for the first two months of the new tax year – total public sector spending and income was £37.7 billion, below the OBR’s £40.7 billion forecast.
Reeves is under pressure to meet fiscal rules to balance daily spending and revenue by 2029-30, while improving public services and driving growth.
Last week, she published a review of her spending. The NHS received a boost of £29 billion a year and other areas of its daily spending set for cuts.
In response to Friday’s figures, Treasury Secretary Darren Jones said: “Last week’s spending review showed how we are investing in the UK’s security, health and economy through planning for change.
