What if the coiled spring of UK retail spending isn't coiled?

Fri, Apr 23, 2021

It's really not possible to see from the Office for National Statistics retail sales figures release today what the true picture is. Comparisons with the previous month or a different month from the year before are far from helpful. But looking back two years to March 2019, the last realistically comparable month, there are some useful pointers about what is happening now and what might be about to come.

In terms of the "coiled spring" theory of consumer spending, where all the past year's savings are released in one big splurge of consumer activity, DIY (+55.5%) is not looking very "coiled". Consumers have carried on spending on home improvements, including equipping their outdoor spaces for social activities, and setting up rooms for working from home. An out and out property market boom has boosted growth further.

Bigger ticket spending on some home items, including electrical appliances and furniture, where stores have been closed (unlike DIY chains) and many people may not feel so assured about buying online, appear to have missed out in March on shoppers' enthusiasm, and may see some catch up from April onwards.

Non-store, including online giant Amazon, has continued to rocket, but it is worth noting that even with restrictions on "non-essential" physical retail not being lifted in England until 12 April, the ONS's estimated share of retail sales made online fell to 32.8%, down from a peak of 36.4% in January. With physical stores opening up in England in April, this is likely to fall back further.

Grocery (food up nearly 15%) has also benefited hugely from continued closures in hospitality and will do so in April and May, but come June, as people start to head back out to bars, restaurants and hotels, the picture will look a lot different. There was also an added factor of preparation for Easter celebrations at home, with the ONS March period covering the five weeks right up to 3 April, the day before Easter Sunday. The grocers face some tough comparables and will almost certainly fail to hold on to the gains they've seen in the last year.

Clothing and footwear, the cinderella sector, hit by both physical store closures and lack of social occasions and work-driven purchases, remains the biggest single area for a "revenge shopping" boom. Retailers will have to hope and pray for suitable weather patterns to make the most of full-price sales in the short window of time in May and June.

Overall, with retail up 6.2% (ex. fuel) on March 2019, consumers are already spending their pent up lockdown savings from hospitality, leisure and travel. There will definitely be shifts between retail sectors (to fashion and beauty, for example) and channels (to physical retail), but as for a further acceleration in retail in late spring and summer, there has to be some doubt.


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