After a good start to Autumn, retail sales in October were disappointing after uncertainty during the run-up to the Budget and rising energy bills spooked some consumers. Figures were also affected by half-term falling a week later this year and shoppers putting their spending on hold in anticipation of Black Friday promotions.
The BRC – KPMG Retail Sales Monitor shows total retail sales edged up 0.6%, well below the three-month average growth of 1.3% and 12-month rate of 1.0%.
Food sales rose 2.9% over the three months to October, with a “modest step up in growth” last month, boosted by pre-festive deals in categories such as wine.
Meanwhile, non-food sales slipped 0.1% with fashion taking the biggest hit as the mild weather delayed winter purchases. Health & beauty sales remained buoyant, helped by demand for beauty advent calendars.
“While October’s growth didn’t continue at the levels seen for the retail sector in September, retailers will feel that there is mitigation and that they can pick up the pace again in November,” said Linda Ellett, UK Head of Consumer, Retail & Leisure at KPMG.
“With clarity now provided by the Budget and many households escaping paying increased tax from their wages, retailers will be hoping for an upturn in consumer confidence and spending. Any positivity from retailers though will of course be dampened given the increased employment costs that they face.
“The promotional weeks around Black Friday will be the first real test of post-Budget consumer sentiment, with retailers looking to electronics promotions and new AI-linked products to build on the computing and mobile phone sales growth that has been one of the better areas of sales performance in recent months.”
Commenting on the food & drink sector, Sarah Bradbury, CEO at IGD, noted that volume, as well as value growth, remained positive despite the downbeat mood in the wider economy.
She added: “Shopper confidence continues to reflect very differing shopper experiences, with lower income households feeling much more negative than higher income households. Retailers will be hoping that measures announced in the budget, such as the uplift in the minimum wage, will give a much-needed confidence boost to lower income shoppers and that the nation is looking forward to the coming festive period with more optimism.”
Separate figures from Barclays also revealed a slowdown in spending but suggested many shoppers were planning ahead for Black Friday. In a survey of 2,000 consumers by the market research firm Opinium on behalf of the bank, 37% said they intended to shop during the sales period, while almost a third said they had already put items in an online basket so they could monitor whether those items would be discounted.
The credit and debit card data from Barclays showed that spending grew 0.7% last month, less than September’s increase of 1.2%. Growth was propped up by spending on non-essential items and entertainment, including ticket sales for Coldplay’s world tour and digital streaming services.
Essential spending – including supermarket sales (-0.8%) – fell by 2.2%, the sharpest decline since the first full month of lockdown amid the onset of the pandemic in April 2020.
However, Jack Meaning, Chief UK Economist at Barclays, was upbeat about the coming months. “With price pressures continuing to ease and tentative signs that consumer confidence is improving once again, following what appears to have been a post-election dip, we think that the stage is set for real spend growth as we move through the final quarter of the year, and look ahead to 2025,” he said.
NAM Implications:
- Consumers that have survived the Lockdown fallout…
- …have emerged savvy and very careful re spending.
- Budget uncertainty has added to their concerns…
- Along with increases in the cost of living…
- In fact, they could be said to be more open to sensible argument.
- Time for supplier and retailer offerings that make sense and reflect current market realities…
- …and price accordingly?
