School uniform and equipment sales boost retailers despite higher inflation
Demand for autumn fashion and back-to-school kit lifted retail sales last month despite shoppers facing continued pressure from higher inflation.
Figures from the British Retail Consortium (BRC) and KPMG showed like-for-like sales rose 1.3% in August, rebounding from a 0.9% fall in 2016 when retailers suffered a blow from the Brexit vote.
Total sales notched up 2.4% compared to a 0.3% decline in 2016, with shoppers upping their spend ahead of the new school term.
In food, total sales remained robust, easing back by 0.2 percentage points to 3.2% for the three months to August, but remaining above the annual average of 2.7%.
Despite the brighter update, BRC chief executive Helen Dickinson warned of a tough road ahead for retailers if consumers tighten their belts.
She said: “These figures tell a less positive story about the health of consumer spending than it might seem at first glance.
“Non-food sales have only just recovered to levels seen two years ago, after a dismal August in 2016; while strong figures for food are largely the result of rising prices, leaving growth in volume terms weaker than last year.
“Stark challenges lurk around the corner for the retail industry.
“Purchasing decisions are very much dictated by a shrinking pool of discretionary consumer spend, with the amount of money in people’s pockets set to be dented by inflation and statutory rises in employee pension contributions in a few months’ time.”
Households have seen their spending power come under sustained pressure from lacklustre wage growth and higher inflation, leading to an expansion of credit and a decline in savings.
The cost of living held steady at 2.6% in July, as a drop in fuel prices offset the rising cost of food, clothing and household goods.
The pause comes as CPI slipped back to 2.6% in June after soaring to a near four-year high at 2.9% in May.
However, online non-food sales continued to motor ahead in August, expanding by 11% compared to 8.8% for the same month last year.
Don Williams, KPMG retail partner, said: “Despite the ongoing challenges for the industry, retailers achieved reasonable growth in August, which is positive news for the industry.
“Even non-food categories experienced an uptick - a welcome relief given the poor performance recently.
“Retailers taught us a thing or two about Back to School, with children’s clothes and footwear obtaining top-marks in terms of sales.
“Elsewhere, growth in home improvement sales - including furniture - point to the influence of staycations, although it could also be that home furnishing retailers are not having to compete with the likes of the Olympics for attention this year.”