Grocery sales were boosted by an earlier Easter and other seasonal events in March, but fears over price rises due to the Iran war have caused consumer confidence to plummet to its “lowest level since 2023”.
Food sales increased 6.8% year on year in March, compared to 1.6% the same period in the previous year, according to the latest BRC-KPMG retail monitor. Inflation – which was running at 3.4% in March – was a significant driver of the rise, while shoppers also splashed out to celebrate seasonal events like Eid, Easter and Mother’s Day.
It helped overall retail sales grow 3.6% year on year, compared with 1.1% the previous year, helped by demand for computers and toys. However, non-food sales were “tepid”, up 0.9%, well below the average of 1.1%.
“The conflict in the Middle East is having an immediate impact on costs with petrol prices up by around 18% at the pump compared to before the conflict began,” said IGD CEO Sarah Bradbury.
“Expectations are that the conflict will continue to increase cost pressures, with rising risks to heating bills, food prices and interest rates. As a result, shopper confidence has dropped to the lowest level since 2023,” Bradbury warned.
“While occasions such as Mother’s Day and Eid provided moments of celebration, they were not enough to offset growing shopper concerns about rising costs. The months ahead will therefore be challenging for both shoppers and the food and drink industry,” she said.
Hopes of an end to the economic uncertainty were dashed over the weekend following the collapse of negotiations between Iran and the Trump administration.
Oil prices have rebounded to more than $100 dollar a barrel after Donald Trump announced the US would blockade the Strait of Hormuz, which in peacetime facilitated 20% of the world’s oil trade, leading to fears that food and inflation could rise exponentially.
The FDF previously estimated food inflation would hit nearly 10% by the end of 2026, on the basis that the fighting ended by mid-April.
“Retailers hope the Middle East ceasefire will bring lasting stability, but the outlook remains uncertain,” said BRC CEO Helen Dickinson.
“Damage to supply chains has already been done, and rising costs – from shipping and fertiliser to insurance and commodities – are piling yet more pressure onto already stretched retailers. Government must act decisively and boldly now to curb inflation by delaying domestic policies that would push prices even higher for shoppers.”
Consumer spending caution would continue to be “heightened” as the fallout from the conflict continued, warned Linda Elliott, KPMG UK head of consumer, retail and leisure.
“While margins remain under pressure on a number of fronts, retailers need to continue to focus on their month-to-month pricing and promotions, their supply chain resilience and delivering the technological transformation needed to set the foundations for growth,” Elliott said.
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