Despite pressure on consumer’s budgets from the cost of living crisis, retailers enjoyed a sharp rise in sales during June, boosted by demand for summer clothing, outdoor goods and BBQ food as people made the most of the warm weather.
Data from the BRC-KPMG Retail Sales Monitor shows total retail sales in the UK increased by 4.9% (+4.2% like-for-like) last month, compared with a fall of 1% in June last year. High inflation would have pushed up the overall value of spending, masking a drop in sales volumes. However, the figure is an improvement on the 3.9% rise in May when a trio of bank holidays failed to get shoppers spending.
Food sales increased 9.8% on a total basis and 10.1% on a like-for-like basis over the three months to June, while non-food sales rose 0.3% and 0.5% on the same basis.
Helen Dickinson, the Chief Executive of the BRC, noted that whilst sun-seekers splashed out on summer-related items, people were “much more cautious” about big-ticket purchases like furniture and technology equipment.
She added: “Consumer confidence remains fragile. But, with headline food inflation easing for two months in a row as prices of essentials start to fall thanks to stiff competition and consumers continuing to shift shopping patterns to mitigate as much inflation as they can, confidence could improve.”
However, Paul Martin, UK Head of Retail at KPMG, cautioned: “Consumers have so far remained resilient, but the triple threats of further interest rate hikes, resolute double-digit food inflation and an economy recovering at slower rate than predicted, could hamper a return to much needed profitable growth across the retail sector.”
The BRC data chimes with separate figures released today by Barclays, which monitors credit and debit card transactions. They showed that consumer card spending grew at an annual rate of 5.4% in June, compared with 3.6% in May.
Spending on clothing increased by 4% in June, the highest growth in almost a year, while the pharmacy, health and beauty sector received its biggest boost since January, with spending up 6.8%. Meanwhile, spending in pubs, bars and clubs climbed 8.4%, the largest increase since the start of this year.
Esme Harwood, a director at Barclays, said people had got “into the swing of summer, bringing a welcome boost to several sun-starved categories”. She pointed out that pubs and bars benefited from more people visiting beer gardens, while spending jumped at butchers and garden centres thanks to the “arrival of barbecue season”.
However, Will Hobbs, Chief Investment Officer, UK Wealth Management, at Barclays highlighted that the UK economy remains in a precarious spot because of high inflation and rising borrowing costs. “Difficult quarters lie ahead as the surge in interest rates continues to put pressure on household cash flows,” he said.
In a speech last night at London’s Mansion House, the governor of the Bank of England stated that inflation will fall “markedly” over the rest of the year. Andrew Bailey said the rate of price increases will come down due to lower energy costs, which should result in falling food bills for shoppers.
NAM Implications:
- It will take more than cautious optimism to undo the damage of 3.5 years of Lockdown fallout.
- But as always, opportunities are available amidst radical change…
- …for those without too much baggage.
