UK retail sales growth fails to keep pace with soaring inflation
UK consumer spending defied talk of recession in July, data from industry bodies showed on Tuesday, but it still failed to match the pace of overall inflation.
The value of UK retail sales grew 2.3 per cent in July compared with the same month a year ago, according to figures produced for the British Retail Consortium, a trade association, in collaboration with the professional services group KPMG. Sales last month were 10.6 per cent higher than in the pre-pandemic month of July 2019.
These growth rates were lower than the rate of price increases, however, indicating that it was likely that sales volumes for retailers had fallen both during the past year and the past three years.
The BRC said the small rise in the annual value of sales “masked a much larger drop in volumes once inflation is accounted for”. Consumer price inflation rose to 9.4 per cent in June and was last week forecast to reach 13 per cent by December, while prices in June were 12.9 per cent higher than three years earlier.
Helen Dickinson, BRC chief executive, said sales of clothing, picnic treats and electric fans had been strong in July, reflecting the heatwave, but that this could not disguise an “incredibly difficult trading period” for retailers.
“Consumer confidence remains weak, and the rise in interest rates coupled with talk of recession will do little to improve the situation,” said Dickinson. With energy bills due to rise further in the autumn, “both consumers and retailers are in for a rocky road throughout the rest of 2022”, she added.
The underlying gloomy message from retailers was not entirely reflected in separate data from payments company Barclaycard, also published on Tuesday, which showed that consumers were more willing to spend money enjoying themselves last month than in the shops.
Barclaycard’s data, which gathers figures from almost half of the UK’s credit and debit card transactions, found spending was 7.7 per cent up on July 2021, though it remained lower than the rate of inflation. This growth rate was up on the June annual spending growth of 6.2 per cent.
The company noted that there were still large annual increases in fuel purchases, reflecting the rise in price of petrol and diesel and payment for utilities made on credit and debit cards. But it said that growth in spending on non-essential items was even faster in July as families largely enjoyed the hot weather and prepared for the summer holidays.
Reporting that families were more optimistic in July about their finances, José Carvalho, head of consumer products at Barclaycard, said: “Brits [were] increasing their discretionary spending on entertainment, travel and takeaways as we head into high summer.”
Eating and drinking out rose at an annual rate of 9 per cent, while travel agents enjoyed three times the spending of July 2021 and bookings with airlines doubled.
But Barclaycard said a “need to buy” mentality was emerging among consumers. It noticed evidence that households were financing increased spending on entertainment by taking a more frugal attitude to regular shopping, whereby they spent less on each supermarket visit but visited more often.
Carvalho said: “This shows that, faced with difficult circumstances, many are finding ways to budget and manage their finances successfully, to cope with ongoing inflationary pressures.”