Despite weak consumer confidence ahead of this month’s budget, retail sales in September saw the strongest growth in six months as non-food performed better than expected.
The data from the British Retail Consortium (BRC) and KPMG shows total retail sales increased by 2.0% last month, up from a 1.0% gain in August and ahead of the average growth of 1.1% over the last year.
The decline in the non-food sector eased to 0.3% over the three months to September, having fallen significantly in recent times due to disappointing summer weather and continued consumer caution after being squeezed by high inflation and interest rates.
The BRC noted that retailers benefitted from shoppers updating their wardrobes ahead of winter and last-minute purchases for the new academic year. However, consumers’ ongoing concerns about the financial outlook kept demand low for big-ticket items such as furniture and white goods.
“With energy prices having again risen, all eyes now turn to the Budget and what impact that will have on household discretionary spending in the final quarter of the year,” said Linda Ellett, UK Head of Consumer, Retail & Leisure at KPMG.
Meanwhile, food sales increased 3.1% over the three months to September, but this was below the 12-month average increase of 4.4%. Sarah Bradbury, CEO at IGD, noted that growth in the grocery retail market slackened with the arrival of Autumn. “September’s sales were still ahead year-on-year, but the pace of increase was down versus August, no doubt depressed by the wet weather as well as cautionary economic messages from the government,” she said.
“With the golden quarter just beginning, retailers have been implementing seasonal ranging earlier than ever, determined to make the most of the coming key trading period.”
Separate consumer credit and debit card data compiled by Barclays shows spending increased 1.2% year-on-year in September after returning to growth in August. Non-essential spending saw its highest growth so far this year, at 2.7%, as retailers’ discounting incentivised shoppers. Several retail sub-categories enjoyed a strong performance, such as clothing, health & beauty, and department stores, while entertainment spending increased 14.4%, boosted by ticket sales for the Oasis reunion tour.
Sales of essential items saw their greatest decline (-1.7%) last month since April 2020. Spending on groceries fell (-0.8%) for the first time since June (-2.2%), as people continued to find ways to cut costs, with supermarkets experiencing a -1.1% dip. Growth at food and drink specialist stores slowed to 2.7% (down from 5.1% in August).
A survey by Barclays found that 70% of consumers are looking for ways to get more value from their weekly shop or reduce how much they spend, up from 66% in August, and higher than the 67% 2024 average. Of those seeking savings, 47% are looking out for loyalty scheme discounts and deals, while 46% are using vouchers or loyalty points to get money off their shopping. This comes as 39% of people say they are trying ‘slow shopping’, by being more intentional and discerning with their purchases.
Karen Johnson, Head of Retail at Barclays, said: “Retail’s recovery emerged as a bright spot in September, despite there being colder weather and darker evenings on the horizon.
“While shoppers’ remain cost-conscious, it’s clear they’re responsive to retailers’ promotional activity. Discerning shoppers are also finding room for treats and little luxuries within their budget, demonstrating that consumers are prioritising spending on things that bring them joy.
“While many are anticipating a costly Christmas, there are encouraging signs that people feel confident in their ability to manage their household finances and take control of their festive spending.”
NAM Implications:
- Confidence is returning slowly but carefully.
- The key for sellers is to pile on the trust-building…
- …and delivering more than it says on the tin, every time…
