Heatwave boosted spending but ‘rocky road’ ahead
The British Retail Consortium revealed a rise in spending but with the Bank of England now expecting inflation to scale 13% in October when energy bills rise, it warned the underlying picture was not so rosy.
Retail sales recorded a 2.3% bump in July as Brits stocked up on summer clothing, electric fans and “picnic treats” to get through last month’s heatwave, figures show.
The British Retail Consortium’s latest data revealed a rise in spending but with the Bank of England now expecting already high inflation to scale 13% in October when energy bills rise, it warned the underlying picture was not so rosy.
BRC’s chief executive Helen Dickinson said: “Sales improved in July as the heatwave boosted sales of hot weather essentials, however, with inflation at over 9% many retailers are still contending with falling sales volumes during what remains an incredibly difficult trading period.”
Dickinson noted that consumer confidence “remains weak” and said the rise in interest rates coupled with talk of recession will “do little to improve the situation”.
“Both consumers and retailers are in for a rocky road throughout the rest of 2022,” she added.
In the four weeks from 3 July to 30 July 2022 total sales rose 2.3% against an increase of 6.4% in July 2021, below the three-month average of 0% and the 12-month average growth of 2.7%.
Over the three months to July, food sales increased 2.3% on a total basis and 1.8% on a like-for-like basis, above the 12-month total average growth of 0.6%.
Over the same period, non-food retail sales dropped 2% overall, below the 12-month average growth of 4.5%.
Paul Martin, UK head of retail at KPMG, said despite consumer polls suggesting confidence is at an all-time low, Brits still seemed “determined to enjoy delayed holidays and an unrestricted summer”.
“Pent up demand, especially for new clothes, has so far been at significant enough levels to keep the overall retail sector in relatively good health,” he said.
But he warned the summer months were likely the “lull before the storm” with conditions set to get tougher as Brits arrive back from summer breaks to holiday credit card bills, another energy price hike and rising interest rates.
He said: “With stronger cost of living headwinds on the horizon, consumers will have to prioritise essentials, and discretionary product spending will come under pressure. As margins continue to be challenged, and costs continuing to rise, a significant drop in demand come the autumn will have detrimental impact on the health of the retail sector.”
Susan Barratt, chief executive of research firm IGD, said inflation was “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,” she said.