22 September 2023
The latest ONS figures show retail sales volumes increased by 0.4% in August, driven by clothing (up 2.3%) and food (up 1.2%), mostly recovering from July’s washout.
Jacqui Baker, head of retail at RSM UK and chair of ICAEW’s Retail Group, comments: ‘World Cup fever helped to create a slight bounce back in retail sales after a disappointing drop in July, but not even the golden touch of the lionesses’ could create a huge win for retailers. Clothing and food in particular saw a boost following July’s washout, as consumer confidence improved, and more people ventured out again and hit the high street.
‘With the cost of living pressures continuing to bite and interest rates remaining high, consumers are wary of what’s to come. As households began their back-to-school preparations, many opted for own brand or non-branded options to make their spending go further.
‘Retailers will be focusing their efforts on making the most of Christmas spending. It’s likely some cost-conscious consumers will start shopping early to make the most of discounts and to spread the cost, so it’s crucial that retailers have the right stock ahead of the Golden Quarter.
‘The latest retail casualty highlights the existing pressures in the sector and the continued need for retailers to adapt. However, no matter how far retailers respond to current consumer needs, the burden of business rates remains a huge barrier to growth, and retailers will be hopeful that the Chancellor addresses key reforms in the Autumn Budget to keep the high street alive.’
Thomas Pugh, economist at RSM UK, added: ‘The rise in retail sales in August suggests that the economy picked up a little after the 1.1% m/m fall in July.
‘There are reasons to be hopeful about the outlook for consumer spending. Real wages are now rising and should increase sharply over the next year as inflation drops more steeply than wage growth. That should support consumer spending power over the next year.
‘The problem is that with consumer confidence still in the doldrums and savings in real terms back to their pre-pandemic level, many consumers will choose to save any additional income rather than spend. What’s more, for a large portion of households, any increase in income will just be eaten up by higher mortgage and rent costs, reducing their disposable income. As a result, we aren’t expecting the increase in real wages to lead to a boom in consumer spending.’