Retail sales picked up last month as the hot weather boosted demand for fans and summer clothing, while part of the rise was attributed to higher food prices.
The BRC-KPMG Retail Sales Monitor showed total spending rose 3.1% in June, up from a 1.0% increase in May and the second-biggest rise this year.
Food sales remained strong, climbing 4.1% on the back of rising food inflation as retailers and manufacturers pass on higher staff costs.
Meanwhile, non-food sales recovered from a 1.1% fall in May, increasing 2.2% as soaring temperatures prompted consumers to buy summer goods and take advantage of seasonal promotions.
However, Helen Dickinson, Chief Executive of the British Retail Consortium (BRC), warned that the outlook is not all bright and sunny, with retailers watching the government closely for details of the upcoming business rates reform. “If the government includes shops within its new higher rates threshold, then many retailers will be forced to rethink their investment plans,” she said.
“The closure of larger stores would harm the local communities they support, costing jobs and reducing footfall in the area they serve. If government wants to improve high streets and help local communities, they must ensure that no shop pays more under their new rates reforms.”
Meanwhile, Sarah Bradbury, CEO at IGD, noted that shopper confidence has been impacted by escalating global tension and economic pressures, with many people feeling uncertain about the year ahead.
“Notably, the number of shoppers expecting food prices to get much more expensive rose from 14% to 20% [IGD research], reflecting renewed inflation concerns,” she said.
“Value sales growth continues to be predominantly driven by inflation, with volumes under sustained pressure. However, the arrival of new summer ranges and improved weather presents retailers with opportunities to tap into more consumer occasions, particularly amongst higher-income shoppers who remain focused on quality.”
Separate figures from Barclays showed consumer card spending, which takes into account broader spending on hospitality and leisure alongside retail, fell 0.1% in June.
Highlighting evidence of consumer caution, it noted that essential spending – including food and fuel – declined by 2.1%. However, the onset of summer festivals, weddings, and sporting events contributed to a marginal 0.8% increase in non-essential spending, led by the strong performance of the entertainment and health & beauty sectors.
Meanwhile, a survey of 2,000 adults by Barclays showed confidence in household finances improved by six percentage points to 73% – a four-month high.
Jack Meaning, the chief UK economist at Barclays, said: “The economy has cooled throughout through [the second quarter], but our data does show pockets of strength.
“However, with global and domestic uncertainty, and temporarily heightened inflation likely to continue, consumers are remaining cautious and maintaining savings buffers.
“We expect this to lead to limited GDP growth for the remainder of this year, before falling interest rates and a stronger sense of certainty drive a return to growth next year.”
NAM Implications:
- It’s volume that counts…
- If anyone has noticed any government sensitivity to retailer business needs to date, please tell.
- In other words, anticipation of retailers not being included in the higher business rates threshold…
- …might be misguided.
- Given that ‘progress’ to date has occurred in a continuing climate of…
- Global and domestic uncertainty
- Temporarily heightened inflation likely to continue
- …consumers are remaining cautious and maintaining savings buffers.
- i.e. Fingers crossed going forward…
