UK consumer stumbles in May as surveys show spending squeezed

LONDON (Reuters) - British shoppers kept a tighter grip on their credit cards last month as they felt growing pressure from rising inflation, new figures showed just two days before they vote on whether to keep Prime Minister Theresa May in power.

FILE PHOTO: Shoppers sit with bags in London, Britain August 25, 2016. REUTERS/Neil Hall

With record numbers of people in work and public borrowing more manageable, the economy has played a smaller role in this election campaign than in 2010 and 2015, though the opposition Labour Party has stressed a growing squeeze on living standards.

Official data for the first three months of 2017 showed that retail sales volumes fell by their most since 2010, and Tuesday’s figures from the British Retail Consortium and Barclaycard point to further weakness.

The BRC said total retail spending last month showed year-on-year growth of just 0.2 percent, after bumper growth of 6.3 percent in April when shoppers spent more over Easter.

Stripping out new store openings, spending fell 0.4 percent, largely in line with economists’ average expectations in a Reuters poll, compared with average growth of 0.6 percent earlier in the year.

“Overall, May’s sales slowdown is indicative of a longer-term trend of a decline in consumer spending power,” BRC chief executive Helen Dickinson said.

Consumer price inflation rose to 2.7 percent in April, its highest since September 2013.

Dickinson said whoever won Thursday’s election needed to ensure Britain did not levy tariffs on imports after it leaves the European Union in 2019, as well as reassuring EU migrants working in retail that they will be able to stay.

May has said imposing controls on EU immigration is one of her main goals in Brexit talks, which the EU says will make it harder to agree a post-Brexit trade deal.

Barclaycard’s data also showed consumers holding back last month. Year-on-year spending growth fell to 2.8 percent, its lowest since just after June 2016’s Brexit vote, from 5.5 percent in April.

The payments company said higher inflation was leading to small changes in spending patterns, but it was too soon to be sure if the May slowdown represented much more than a temporary fall-back after heavy spending over Easter.

Britain’s labour market remains strong, even if official measures of wage growth remain lacklustre. The Recruitment and Employment Confederation said businesses faced shortages of suitable staff as they hired permanent and temporary employees at the fastest rates since April and March 2015 respectively.

“EU citizens are leaving the UK in droves,” REC’s policy director, Tom Hadley, said. “Employers seeking to fill vacancies are running out of options.”

Both the Conservatives and Labour have said they want to allow EU citizens already living in Britain to stay, but the Conservatives have said they will only guarantee this if similar rights are given to British citizens living abroad.

Official migration figures showed the number of EU citizens leaving Britain last year rose by more than a third to 117,000.

Reporting by David Milliken; Editing by Toby Chopra