Christmas comes early for retailers

Commenting on the October ONS Retail sales data, which showed an increase in retail sales volumes of 0.8%, Jacqui Baker, partner and head of retail at RSM UK, said: ‘Early Christmas shopping, Halloween and a half term boost resulted in a 0.8% increase in retail sales in October, which is good to see. Increases in non-foods sales were up 7.2% -  clothing, toys, sport equipment sales were offset by lower fuel spending due to panic buying during the fuel shortage in September. 

‘Christmas may have come early for retailers, as worries around deliveries and supply chain issues have encouraged more consumers to bring Christmas spending forward to avoid disappointment on Christmas morning. Many are opting to pay full price rather than waiting for the Black Friday and Cyber Monday deals at the end of November. 

‘This could be a good move as supply issues have changed the retail landscape this year, and once stock is gone it’s gone, as it will be difficult to replenish products; so many retailers will be shifting old stock into the Black Friday sales rather than discounting this year’s must-have Christmas presents. 

‘After travel restrictions and muted Christmas celebrations last year, we could see consumers splashing out on a bumper festive period, particularly when many households will have pent up savings following the pandemic. This could mean Christmas 2021 will be one to remember. Retailers will be hoping for an early Christmas present as consumers overcome their confidence jitters and gift a significant sales boost during the Golden Quarter.’ 

Thomas Pugh, economist at RSM UK, added: ‘The small rise in total retail sales volumes in October will give a bit of a boost to consumer spending and GDP at the start of Q4. Indeed, seasonally adjusted new car registrations recovered somewhat after a dismal September, suggesting consumer spending picked up a bit. What’s more, consumer confidence, released separately, rose from -17 in October to -14 in November.

‘The next six months will be marked by a combination of rising utility prices and higher taxes that will mean that households real disposable incomes will fall over the rest of 2021 and will barely grow at all in the first half of 2022. In theory, this suggests that consumer spending may be relatively subdued. Indeed, we aren’t expecting the economy to grow quickly in Q4 or Q1 2022.

‘However, households have accumulated over £200bn in savings, which they will probably use to offset the hit to their incomes from higher prices. There is a good chance that consumers decide to use some of these savings to splash out a bit this Christmas, which could give growth in Q4 a bit of a boost.’