Latest retail sales data suggests shoppers are cutting back on purchases of clothes and other non-essential items as they face soaring energy bills and higher food prices.
Figures from the British Retail Consortium (BRC) and KPMG show total sales edged up 1% in August, following growth of 2.3% in July when the heatwave boosted spending.
On a like-for-like basis, ironing out changes in shop floor space, sales were up 0.5%, slowing from the previous month’s 1.6% rise.
However, the data is not adjusted for inflation, which is running at historically high levels. The BRC noted that the small rise in sales masked a big drop in volumes once inflation is accounted for.
Over the three months to August, food sales increased 3.8% on a total basis and by 3.3% on a like-for-like basis. Non-food retail sales decreased by 2.0% on a total basis and 2.6% on a like-for-like basis.
Clothing sales were said to have been sluggish as summer events ended, and parents held back on back-to-school spending. White goods and homeware remained hardest hit, but products such as air fryers and knitwear did get a boost as consumers prepared for soaring energy bills.
“With some predictions of inflation reaching 20% in the new year, households and retailers are preparing for a particularly tough time ahead,” said Helen Dickinson Chief Executive of the BRC.
She noted that retailers are facing their own rising costs and called on the new Prime Minister Liz Truss to help relieve some of the cost burden by freezing the business rates multiplier for all retail businesses next year.
“Without this, inflation could whack an additional £800m onto retailers’ rates bills, which will inevitably lead to even higher prices for households at a time when people’s income is under unprecedented pressure,” said Dickinson.
Don Williams, Retail Partner at KPMG, added: “As consumers return from summer holidays to an 80% increase in the energy price cap, double-digit inflation and Christmas just three pay cheques away, the brakes could be firmly applied on non-essential spending for most UK households.
“The storm clouds are closing in as retailers brace themselves for a fall in demand – at a time when their own margins are under pressure from rising costs. Supporting customers through these difficult times will be paramount for the health of the sector as we move through the rest of this year. Doing this will require a more granular understanding of current and future customers, continual review of the cost base and focus on how to drive productivity, especially using more effective technology. It is in these areas that opportunity lies even in a challenging trading environment.”
Meanwhile, Susan Barratt, CEO of IGD, revealed that food and drink sales volumes had spent the entire month of August in negative territory, with value sales propped up by the ongoing inflationary pressures that are feeding through the supply chain.
She said: “August has been dominated by increasing inflation, with talks of this going even higher, along with energy price increases. People are reacting – taking action now to try and get ahead. Our data shows that shoppers are investing more time in how they can save money by planning more and searching for value with private label options and seeking out discounts.”
NAM Implications:
- Ask your factory manager to confirm it’s the volume that counts…
- …all else is wishful thinking.
- Anyone in doubt, think what unprecedented inflation really means…
- And being all Trussed up, won’t make much difference…
