Save, make, understand money

Household Bills

Health and beauty products drive up UK retail sales in August but card spending falls

Nick Cheek
Written By:
Nick Cheek

UK retail sales grew by 4.1% in August compared to the 1% increase for the same month a year ago, according to figures from the UK’s leading retail organisation.

Figures from the British Retail Consortium (BRC) also found that the rise in sales for August surpassed the three-month average growth of 3.6%.

Over the three months to August, food sales rose by 8.2%, which slightly above the 12-month average of 8% growth.

In contrast, non-food purchases decreased by 0.2% in the three months to August, below the 0.9% growth annually. However, like-for-like non-food sales growth for August was higher this year compared to the same month last year.

In-store non-food sales rose by 1.3% since August last year, but this was below the 12-month growth average of 3.6%. Online non-food sales saw a decrease of 1.7% in August, but despite the decline, it was a slower downturn than the 6.1% fall in sales found for August last year.

Consumer confidence improves

Helen Dickinson, chief executive of the British Retail Consortium, said: “Retail sales in August improved, particularly on July’s poor performance. Sale of non-food products had their best month since February, particularly for health and beauty products as retailers continued to invest in new, exciting brands, and customers splurged on self-care.

“The sales figures reflected the improvement in consumer confidence in August, and retailers hope this general upwards trend will carry on. Not all areas benefited, clothing and footwear saw weaker growth as families held back spending on children’s uniforms and other back-to-school goods until the last minute. Easing inflation will certainly be welcomed by consumers, but as the rate of price rises falls, so will the extra spending needed by consumers. As a result, sales growth may fall in the coming months, even if volume growth does not.”

Susannah Streeter head of money and markets, Hargreaves Lansdown said: “High street sales held up better, according to the BRC, helped by a splurge on self-care as travellers stocked up on beauty treatments at home or stocked up on sun cream for trips to warmer climates.

“After such a soggy summer, this spurt of good weather should provide a ray of sunshine for hospitality. The heatwave this week should mean pubs, bars and restaurants who have invested in outdoor space might finally be able to recoup some of August’s lost beer and food sales due to stormy skies.2

Rainy August slows down card spending

Meanwhile, a wet August dampened consumer card spending down to 2.8% from 4% in July, according to research compiled by Barclays. The unexpected summer rain resulted in fewer people using pubs, restaurants and shops.

However, retail was boosted with higher cinema ticket sales due to the release of the two recent blockbusters Barbie and Oppenheimer. Overall there was a huge surge of 101% in cinema spending, and the entertainment sector as a whole performed well with an increase of 12% in sales.

Spending on essentials saw just a slight rise of 1%, which was the lowest increase since April 2020, where consumer card spending fell by 2.9% as lockdown began.

Supermarkets and food and drink specialist stores also saw weaker spending growth at 4.5% and 4.9% respectively, in comparison to July where sales rose by 5.2% and 6.2%.

Thoughts are also now turning to Christmas spending, with almost a third anticipating a more expensive festive season this year compared to last year.

Abbas Khan, UK Economist at Barclays, said: Muted spending growth in August is in line with other data sources suggesting that the bite from monetary tightening is starting to be felt more acutely.

“However, with further moderation in inflation and strong wage growth set to support real household disposable incomes, we continue to think the economy will avoid a recession in the coming quarters, even if growth is only set to be sluggish.”

Streeter added: “Barclaycard’s latest data shows how much of a struggle it’s been for hospitality in August as rain-soaked days put off tourists from spending. Sales at restaurants fell 5.8% while bars, pubs and clubs saw their lowest growth in sales since last October, coming in at 2.8%.

“Although consumer card spending grew 2.8% year-on-year in August it was significantly below July’s growth figure of 4%. Cinemas provided a bright spot on a gloomy landscape, with Barbie a ray of rosy light as holidaymakers sheltered from the rain to watch the hit movie.”