Warm weather and an interest rate cut helped boost retail sales in August, although retailers fear that speculation about tax rises could weigh on consumers in the run-up to the crucial Christmas trading period.
The BRC – KPMG Retail Sales Monitor shows total sales in the sector increased by 3.1% year-on-year in August, ahead of the 12-month average growth of 2%.
This was driven by food sales, which climbed 4.7%. However, the British Retail Consortium (BRC) stated that this was largely down to rising prices (+4% in August), rather than increasing volumes.
Meanwhile, non-food sales rose 1.8% in August, above the 12-month average growth of 1%. Areas such as computing performed well as parents readied children for the new academic year, while furniture also did better for the second month in a row, following several months of falling sales. However, the BRC noted that new school clothing and footwear did not sell as well as expected, as some cash-strapped families opted for second-hand options.
Despite the relatively robust trading over the summer period, retailers are now facing a potentially subdued ‘golden quarter’, the crucial three-month period in the run-up to Christmas that many retailers rely on for the bulk of their revenues.
“With the later-than-expected Budget falling just days before Black Friday, many are uneasy about how consumer confidence and spending could be impacted by tax rise speculation in the run-up to Christmas,” said Helen Dickinson, Chief Executive of the BRC.
“Government needs to shore up both consumer and business confidence. An assurance that the business rates reforms will deliver a meaningful reduction for retail and hospitality would remove uncertainty, give businesses the confidence to invest in local communities and help limit the price rises which are worrying consumers.”
Last week, Chancellor Rachel Reeves announced that the budget would be held on 26th November, later than many had expected.
Sarah Bradbury, CEO at IGD, noted that shopper confidence had fallen for a third consecutive month in anticipation of further food price rises.
She added: “The emotional weight of rising energy bills and fears of tax hikes in the Autumn Budget are adding to the strain, especially as unemployment ticks upward. Yet, there are glimmers of relief: interest rates have been cut again, and mortgage rates are easing, offering some financial respite. While volumes remain under pressure, financially resilient shoppers may remain more confident, even as they brace for a challenging winter.”
NAM Implications:
- Political uncertainty regarding Autumn tax increases is impacting consumers’ willingness and ability to spend…
- …Coupled with suppliers and retailers’ uncertainty regarding new packaging taxes and changes to business rates…
- …have dampened potential enthusiasm arising from summer sales increases.
- Inevitably…
