High food prices led to lower food sales when adjusted for rapidly rising inflation in the U.K. in June, according to the British Retail Consortium.
Spending on food was up 9.8 percent in the second quarter in the U.K., but food prices were up 14.6 percent for food, meaning less food was sold overall. Non-food spending rose 0.3 percent in the quarter.
Despite Asda and Waitrose, Great Britain's third- and eighth-largest supermarket chains, instituting price freezes on hundreds of products in June, KPMG U.K. Retail Head Paul Martin said stubborn food price inflation was reducing U.K. shoppers' spending on non-essential items.
"Consumers have so far remained resilient, but the triple threats of further interest rate hikes, resolute double-digit food inflation, and an economy recovering at a slower rate than predicted could hamper a return to much-needed profitable growth across the retail sector," Martin told Reuters.
Barclays U.K. Wealth Management Division Chief Investment Officer Will Hobbs said Britain's economy remained “in a precarious spot” as the Bank of England plans to raise interest rates as high as 6.5 percent by 2023, up from its current level of 5 percent, in order to curb inflation.
"Inflation contagion is perhaps furthest advanced here," Hobbs said. "There is more work for central bankers yet, even as the creaks and strains on the mortgage and other borrowings become increasingly audible."
Consumer price inflation was 8.7 percent in May, but grocery inflation hit 17.2 percent that month, which was actually down from 17.3 percent in April and 17.5 percent in March. Consumer spending on debit and credit cards rose 5.4 percent year-on-year in June, with spending on groceries up 9.5 percent, the most since February 2021, according to the BRC. Overall U.K. retail spending increased by 4.9 percent in annual terms in June, up from 3.9 percent in May.
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