Industry data shows that retail sales continued to improve in July when compared with the same month last year, although growth slowed as the reopening of the hospitality and leisure sectors led to a dilution in consumer spending.
The British Retail Consortium (BRC) and KPMG sales monitor reveals that total sales last month had increased by 6.4% compared to a year ago, although this is weaker than the three-month rolling average of 14.7%.
The reopening of non-essential retailers in April continued to skew the numbers, with non-food sales up 64.9% over the three months to July, compared with the same period a year ago that was impacted by the first lockdown. But on a two-year pre-pandemic basis, non-food store sales remained down 3.6%.
The data shows that fashion store sales are back at pre-pandemic levels, whilst sales of equipment for working from home fell as people headed back to offices.
Food sales continued to grow, up 2.9% compared with a year ago, although the sector’s performance is weakening as consumers start to consume more food and drink in restaurants and pubs following the easing of restrictions. Susan Barratt, Chief Executive of IGD, also highlighted that consumers are increasingly concerned about food inflation, with research showing that 16% of shoppers are expecting prices to get much more expensive in the year ahead, up from only 8% in April.
Helen Dickinson, the BRC’s Chief Executive, said: “July continued to see strong sales, although growth has started to slow. The lifting of restrictions did not bring the anticipated in-store boost, with the wet weather leaving consumers reluctant to visit shopping destinations.”
Online sales remained strong, with the BRC figures showing a digital penetration rate of just under 50% for non-food items, up from 30% two years ago.
“Many shops and local communities have been battered by the pandemic, with many high streets in need of further investment,” said Dickinson.
“Unfortunately, the current broken business rates system continues to hold back retailers, hindering vital investment into retail innovation and the blended physical-digital retail offering. The government must ensure the upcoming business rates review permanently reduces the cost burden to sustainable levels.”
Meanwhile, Paul Martin, UK head of retail at KPMG, expects to see a slowdown in spending habits as economic challenges come to the fore.
He said: “Staffing pressures, increases in commodity and component costs, rising inflation eating into households’ spending power and stalling consumer confidence could lead to a slowdown in retail sector growth as we head into autumn.”
