Warm Weather And Inflation Drive Up Retail Sales But Volumes Fall
Latest figures from the BRC and KPMG show total retail sales in the UK increased 2.3% in July, against a rise of 6.4% the year before. Trading was boosted sales of hot weather essentials, although growth was largely driven by inflation and masked a drop in volumes.
On a like-for-like basis, sales grew 1.6% from July 2021, when they had risen 4.7%.
Over the three months to July, food sales were up 2.3% on a total basis and 1.8% like-for-like, which was above the 12-month total average growth of 0.6%.
Meanwhile, non-food sales fell by 2.0% on a total basis and 2.5% like-for-like, which was down on the average growth of 4.5% over the past year.
In-store sales of non-food items increased 2% on a total basis and 1.2% like-for-like, while online non-food was down 3.9% in July.
Helen Dickinson, Chief Executive of the BRC, noted that the heatwave last month had boosted sales of items such as summer clothing, picnic treats, and electric fans. However, with inflation at over 9%, she said: “Many retailers are still contending with falling sales volumes during what remains an incredibly difficult trading period.”
Dickinson highlighted that consumer confidence remains weak, and the rise in interest rates coupled with talk of recession will do little to improve the situation. “The Bank of England now expects inflation to reach over 13% in October when energy bills rise again, further tightening the screws on struggling households. This means that both consumers and retailers are in for a rocky road throughout the rest of 2022,” she said.
Commenting on the performance of the food & drink sector, Susan Barratt, CEO of IGD, said: “July’s food and drink value sales were again flattered by inflation, masking some ongoing dips in sales volumes. Shoppers are genuinely tightening their belts by buying fewer items in addition to switching stores and buying more private label products.
“Our Shopper Confidence Index improved a little in July, no doubt boosted by England’s Lionesses successful Euro 2022 football campaign. Plus, the heatwave and one in four families receiving the first cost of living payment, fewer were impacted by rising energy bills (68% compared to 74% in April ’22). However, with food price inflation forecast to increase in the coming months and Ofgem expected to announce a significant increase in the energy price cap at the end of August, there are still significant challenges ahead.”
Separate figures released today by Barclaycard show consumer spending on credit and debit card cards was up 7.7% in July compared to a year earlier, boosted by sales of clothing, beauty products and staycations.
However, spending on essential items rose 7.0% year-on-year, greater than the 4.0% rise recorded in June. The increase was driven largely by fuel and supermarket shopping, both of which saw year-on-year growth (29.9% and 2.1% respectively), as the prices of fuel and everyday items continued to climb. Meanwhile, average spending on utility bills rose 43.9%, even higher than last month’s growth of 39.6%.
Barclaycard noted that cash-stapped households were also starting to cut back on overseas travel and dining out. However, somewhat surprisingly, its survey showed confidence in household finances with 66% of respondents saying they felt confident about their household finances, compared to 59% in June.
Jose Carvalho, head of consumer products at Barclaycard, said: “Inflation continues to have a noticeable impact, with price rises forcing shoppers to spend more on essential everyday items such as fuel, butter and milk, and to cut back on some discretionary experiences such as meals and drinks out, and holidays abroad.
“We know that this is a really challenging time for many consumers, so it is reassuring to see that more Brits are feeling confident about their household finances and ability to live within their means each month. This shows that, faced with difficult circumstances, many are finding ways to budget and manage their finances successfully, to cope with ongoing inflationary pressures.”
