Inflation takes toll on shoppers

24th Mar 2011 11:00

Higher prices are taking a toll on the UK's shoppers with sales volumes last month slowing sharply from January.Sales volumes rose by 1.3% on an annual basis in February, down by 0.8% on the previous month, though in value terms sales jumped by 5%, down just 0.1% on January.The difference reflects a surge in shop inflation with food stores prices in February 3% higher than a year ago and non-food stores up by 2.5%. Even excluding fuel, prices rose at the fastest rate for any month since the Office of National Statistics (ONS) began collecting the data in 1988.Economists had expected a fall in volumes as the impact of the pre-VAT increase fell away, but the 0.8% decline was more than predicted. Retailers are also not expecting much improvement in the short term. Next chief executive Simon Wolfson this morning commented that another "challenging" year lay ahead, adding that "things are likely to get worse before they get better" as inflation, public sector cuts and limited growth in consumer credit hit the sector.J Sainsbury, too, was cautious this week on the outlook for consumer spending.The ONS said only petrol and non-store retailers saw volumes pick up in February, while household goods stores recorded a 2.5% decline - the biggest drop in a year.Sales of hardware, paint and glass, music and video equipment and electrical household goods had suffered due to flat house prices.pw