UK retail sales experienced a modest increase of 3.9% in May compared to the same month last year.

This growth was below the 3-month average of 4.7% and the 12-month average of 3.4%.

Like-for-like retail sales, which exclude the impact of new store openings, also saw a rise of 3.7% in May, but it was still below the 3-month average of 4.6% and above the 12-month average of 3.1%.

Food sales drive growth while non-food struggles

Food sales showed a significant increase of 9.6% on a total basis and 9.8% on a like-for-like basis over the three months leading to May. This outperformed the 12-month total average growth of 6.9%.

However, the growth was not sustained throughout the month, as Food sales were only in growth on a year-on-year basis for May.

In contrast, Non-Food sales experienced a modest rise of 0.7% on a total basis and 0.5% on a like-for-like basis during the same three-month period. While this was an improvement compared to the 12-month total average growth of 0.5%, it still reflects a relatively slow recovery.

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By GlobalData

Non-Food items bought online also decreased slightly, with the penetration rate dropping from 37.1% in May 2022 to 36.3% in May 2023.

Bank holidays failed to boost spending

Despite three bank holidays in May, retailers saw a slowdown in sales growth, reaching its lowest level in six months. The initial boost in food sales during the Coronation weekend was not sustained for the rest of the month.

Discretionary spending continued to decline as the rising cost of living squeezed household budgets. However, there was a glimmer of hope as brighter weather towards the end of the month led to increased sales of summer fashion, gardening and DIY products.

Retailers remain cautious about the future

With consumer confidence still recovering and household incomes under pressure, substantial sales growth in the upcoming months is unlikely. Retailers are cautiously optimistic about a potential improvement in confidence, considering signs that inflation might have peaked.

They urge the government not to impose further regulations and taxes on businesses, as this would increase costs for retailers and prices for customers.

Overall, the retail sector faces challenges due to the impact of inflation and high food prices. Although consumers are showing resilience, the uncertainty about the economy and potential interest rate hikes might affect their spending behaviour.

The grocery sector remains strong, but consumers are facing the reality of higher food prices, impacting their ability to spend on non-essential items.