Latest figures from the BRC-KPMG Retail Sales Monitor (RSM) confirm that consumers remained cautious with their spending ahead of Christmas, despite a big push from retailers around Black Friday deals.
Total retail sales growth was up from 2.5% in October to 2.7% in November, although this was still weaker than the 12-month average growth of 4.1%. The latest figure was also below October’s headline consumer price inflation reading of 4.6%, suggesting shoppers are buying fewer goods despite spending more – a pattern seen since the second half of 2021.
Food sales increased 7.6% over the three months to November, but this is below the 12-month average growth of 8.4%. Non-food sales decreased 1.6% as consumers focused on essentials.
The BRC data shows that weakness in the sector, hit by the cost of living crisis, could continue into the festive season, dashing hopes that retailers will get a much-needed lift at the end of a challenging year.
BRC Chief Executive Helen Dickinson noted that Black Friday discounts began earlier this year as many retailers tried to tempt cash-strapped consumers into spending. While this had the desired effect initially, she said that the “momentum failed to hold throughout the month, as many households held back on Christmas spending”.
Dickinson concluded: “Retailers are banking on a last-minute flurry of festive frivolity in December and will continue working hard to deliver an affordable Christmas for customers so everyone can enjoy some Christmas cheer. Looking ahead to 2024, retailers will have to shoulder many new cost pressures, including a rise to business rates, as well as costs from other new regulations. These combined with the biggest rise on record to the National Living Wage will mean retailers will have less capital to invest in lowering prices for their customers.”
Separate data published by Barclays today showed that consumer debit and credit card spending grew by 2.9% year-on-year last month. That was up from 2.6% in October, but still well below the rate of inflation.
Boosted by Black Friday, spending on non-essential items grew by 2.7% in November, compared with 2% in the previous month. Clothing retailers (+2.8%) and department stores (+5.0%) saw notable increases compared to October.
However, spending in restaurants fell further last month, as did spending on entertainment, furniture, electronics and home improvements.
Jack Meaning, Chief UK Economist at Barclays, commented: “This data suggests consumers are continuing to spend more but get less for their money, as spending growth remains below inflation. However, the gap is narrowing as the rate of price increases slows, and we expect it to narrow further in the coming months.
“It’s reassuring to see that some of the previous weakness in spending was due to unseasonal weather, as shoppers go out and finally buy that new winter coat and get in the Christmas spirit. But the key question for the UK is what happens after the holiday period – it will take more than a festive bounce to keep consumers spending in 2024.”
NAM Implications:
- Worried consumers holding back, retailers supporting via price cuts.
- Post-Christmas retail price support will be diluted/eliminated…
- …given the big retail cost burdens that will kick in.
- i.e. including a rise in business rates, new regulations and a rise to the National Living Wage.
- In other words, keep your powder dry…
