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Consumer spending at two-year low due to price competition

By Josie Clarke

Published 17/08/2016

Growing prices in hotels and restaurants - as well as at the petrol pump - helped push inflation to 0.6% during July
Growing prices in hotels and restaurants - as well as at the petrol pump - helped push inflation to 0.6% during July

The amount UK consumers spend on everyday items has suffered its worst year-on-year performance for nearly two years, with the third biggest decline among 21 European countries, latest figures show.

Analysts Nielsen said the UK's 1.6% quarterly decline was primarily driven by fierce competition among retailers.

The prices shoppers paid for fast-moving consumer goods (FMCGs) rose just 0.7% year-on-year across Europe in the second quarter, while volumes rose 0.1% - the lowest level for over two years, according to Nielsen retail performance data.

As a result, retailers saw just a 0.8% increase in takings, the lowest figure since measurement began in the final quarter of 2008.

Among the big five western European markets, Spain had the highest growth at 2.1%, followed by Italy (1.2%), while the UK had its worst performance for nearly two years with a drop of 1.6%.

Nielsen's European director of retail insights, Jean-Jacques Vandenheede, said the historically low performance across Europe was driven by the timing of Easter compared with last year and, more significantly, fierce retail price competition.

The big four grocers have been struggling to protect their market share from the rise of German discounters Aldi and Lidl.

And the UK launch of online grocery service AmazonFresh in June looks set to make the grocery sector even tougher.

Meanwhile, grocer Morrisons has offloaded its 10% stake in US online food retailer Fresh Direct for £45m as the company continues to break with the strategy of former boss Dalton Philips.

The firm said the sale, first announced over two years ago, represents a £14m premium on its investment.

The supermarket acquired the stake in 2011 as it was preparing to launch into the online grocery market under Mr Philips.

Belfast Telegraph

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