Growth slows in some areas, accelerates in others during August

Helen Dickinson OBE, Chief Executive, BRC: 

“Retail sales growth slowed in August compared to the previous month as consumers reined in spending amidst the spiralling cost-of-living.

While inflation in retail prices is lower than general inflation at over 10%, this still represents a significant drop in sales volumes. For the first time in recent months, clothing sales were 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 thrifty consumers prepare 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. As retailers face into their own rising costs from all directions, they continue to do all they can to protect customers from price rises. The new Prime Minister could help relieve some of the cost burden, and ease the upwards pressure on prices, by freezing the business rates multiplier for all retail businesses next year. Without this, inflation could whack an additional £800 million 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.”

Paul Martin, UK Head of Retail, KPMG: 

“The warm weather combined with rising prices, saw August sales growth rise by 1% year on year, although volumes will have been challenged.

The heatwave saw strong growth for health items such as suntan lotion, whilst food and drink sales for summer barbeques grew by 5% year on year and home accessories also saw growth for the first time in months. Online sales dipped by over 6% in August, however the locked-in step-up of online penetration remains.

Worryingly, August data revealed a significant fall in clothing sales – the category which has been the most robust performer this year which could signal the start of shoppers pulling back from non-essential spending.

As consumers return from summer holidays to an 80% increase in the energy price cap, double digit inflation and Christmas just 3 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.”


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