UK retail sales experienced a significant decline of 2.7% in May 2025, marking the fastest drop in over a year and the largest monthly fall since December 2023.

This decline represents the first decrease of the year, with all categories experiencing reduced sales volumes, raising concerns about consumer spending habits amidst high inflation and economic uncertainty.

Overall, retail sales volumes fell across all sectors, including a 2.5% decline in household goods and a 1.8% decrease in clothing and footwear sales.

Supermarkets reported the largest drop in food sales, with a 5% decrease attributed to rising food inflation and reduced purchases of alcohol and tobacco.

The Office for National Statistics (ONS) noted that lower sales in alcohol and tobacco sectors indicated consumers were making cutbacks due to rising costs.

Rising food inflation, particularly in essential items like chocolate, coffee, cheese, and meat, has contributed to decreased consumer spending.

Experts suggest that the decline in retail sales reflects a shift in consumer behavior, with households prioritizing essential spending and cutting back on non-essential purchases due to ongoing cost-of-living concerns.

Sagar Shah from McKinsey & Company highlighted that over half of UK shoppers are concerned about rising prices and inflation, which is affecting their spending patterns.

Despite the disappointing sales figures in May, there are optimistic signals for summer spending driven by cultural events and seasonal trends, such as increased demand for summer-related products.

Industry experts believe that upcoming cultural moments and events, such as Father's Day and music festivals, may spur consumer spending in June.

Following the retail data release, the British pound fell approximately a quarter of a cent against the US dollar, coinciding with a larger-than-expected budget deficit of £17.7 billion reported for May.

Capital Economics' Chief UK Economist Paul Dales noted that the drop in retail sales indicates the end of a period of economic growth seen in the first quarter of 2025, although consumer spending may still perform better than other sectors this year.