In the News

Tough times for retail sales

Penny Brooks

19th April 2017

TheBritish Retail Consortium posted figures last week for retail spending in the first quarter of the year, which show the effect of the rising cost of essentials. Spending on food rose by 1.2%, due to the rise in food prices rather than to more being bought. Meanwhile, consumers cut their spending on 'discretionary items' - non-essentials like clothing - by 0.8%.

As the value of the pound falls further, and as so much of our essentials like food and oil is imported, prices are inevitably rising. Fuel prices rose 19.4 per cent over the year to February 2017, and so figures from Barclaycard show a 16.1 per cent increase in spending on petrol in March 2017 compared with the same month a year earlier. This inevitably means, with wages rising only slowly, that consumers cannot spend as much on other items, and so profit margins for retailers are bound to be squeezed. The demand curve for sales of non-essentials will shift to the left, the quantity sold and prices paid are likely to both fall, and breakeven will become harder to achieve.

Penny Brooks

Formerly Head of Business and Economics and now Economics teacher, Business and Economics blogger and presenter for Tutor2u, and private tutor

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