Latest data from the BRC-KPMG Retail Sales Monitor shows growth slowed last month as consumers limited their spending in the face of higher housing costs.
The value of retail sales rose by an annual rate of 2.5% in October, down from 2.7% in September and well below the 12-month average of 4.2%. The figures are not adjusted for inflation, so the volume of goods sold is likely to have dropped significantly.
Food sales increased 7.9% over the three months to October but were below the 12-month average growth of 8.5%. Meanwhile, non-food sales slid 1.0%, compared to 12-month average growth of 0.6%.
Helen Dickinson, Chief Executive of the British Retail Consortium, noted that retail sales growth had slowed as higher mortgage and rental costs hit consumer confidence. She also suggested that households were delaying their Christmas spending to take advantage of discounts during the Black Friday sales.
Paul Martin, UK head of retail at advisory group KPMG, predicted that high street shops face a tough Christmas. He said: “Whilst consumers are now operating in a lower inflationary environment compared to October last year, where inflation peaked at over 11%, there is no doubt that the last 12 months have taken a toll on confidence and their ability to spend. Coupled with a higher interest rate environment, dwindling Covid savings and the heating coming back on, beleaguered consumers are thinking very carefully about how they spend their money. As a result, the strong demand that has kept some retailers afloat over the last 18 months is now falling away.”
Martin added: “Although the retail sector has done some sterling work around controlling their own cost environment, the health of the industry is at the mercy of macro demand. Retailers are facing a challenging Christmas, competing for a shrinking share of wallet, driven by promotions that will no doubt cut into already stretched margins. With spending levels expected to be much more muted this year, the run-up to Christmas could be the most challenging we’ve seen since pre-pandemic days.”
Separate figures published today by Barclays showed that consumer card spending grew by 2.6% year-on-year last month – the smallest rise since September 2022.
Spending on essential items saw a smaller increase (+3.9%) than last month (+4.6%). This was largely due to supermarkets (+5.3%) and specialist food and drink stores (+5.9%) seeing less of an uplift than in September (+6.9% and +8.0% respectively), as food price inflation continued to ease and most consumers (69%) continued to look for ways to reduce the cost of their weekly shop.
Meanwhile, spending on household goods dropped by an annual rate of 6.5%, with furniture and home improvement stores registering declines of more than 7%.
Restaurant spending fell by 10.3%, although pubs and bars were boosted (+5.9%) by England’s performance in the Rugby World Cup.
Jack Meaning, Chief UK Economist at Barclays, commented: “It looks as though the oomph continues to go out of squeezed UK consumers. The latest transaction data shows they are pulling back from discretionary spending and increasingly worried about their future ability to spend, adding to the picture painted by other data.
“Third-party consumer confidence data showed a significant drop in October, coming off the back retail sales contracting significantly in September. While some of these effects might be being amplified by unseasonal weather, it’s hard to dismiss the growing evidence.”
NAM Implications:
- Falls in consumer demand is sapping away the confidence of all stakeholders.
- (Reasons have been well publicised so this should come as little or no surprise)
- Meaning that growth, if any, will come at the expense of rivals…
