Brian BollenRetail sales rose in the UK in August, both in volume and value, according to the latest figures released by the Office for National Statistics this morning. Volume was up 1% on the July 2017 comparable and 2.4% on August 2016. The ONS says that this is the 52nd month in succession the figure has risen.
The rise in value year-on-year was 5.6%, indicating that prices have risen significantly over that period. In August 2017, average store prices increased across all store types compared with August 2016. Non-food stores and non-store retailing recorded their highest year-on-year price growth since March 1992, at 3.2% and 3.3% respectively.
Rising prices in clothing stores and petrol stations provided the main contribution to store price inflation. Average prices in petrol stations increased by 5.0%. In textile, clothing and footwear stores prices went up by 4.2%. The ONS says this is consistent with the Consumer Prices Index (CPI).
Buying continues despite price rises
The ONS notes that despite the price increases in clothing stores, which it thinks is likely to be as a result of sales promotions ending, consumers continued to buy more from these stores. It adds that feedback from businesses suggests that footwear stores fared well with back-to-school items in August.
Non-food stores and non-store retailing were the primary drivers of overall growth for both value and volume sales in August. The quantity bought within food stores remained flat on the month. Petrol stations showed increases in both the amount spent and quantity bought, at 0.2% and 0.1% respectively.
The ONS figures show that in August 2017
- Average weekly spending online was £1.1bn, an increase of 15.6% compared with August 2016
- The amount spent (value) online accounted for 16.4% of all retail spending, excluding automotive fuel, compared with 15.0% in August 2016
ONS senior statistician Kate Davies said: “We are seeing strong price increases across all store types compared with a year ago, reflecting wider inflationary pressures. However, we are still seeing underlying growth in sales volumes, and with strong growth in non-essential purchases as consumers continued to buy more from non-food stores.”
A view less bullish
Alex Marsh, managing director of Close Brothers Retail Finance, takes a less bullish view. While overall retail spending was up, August saw a lull in big ticket spending driven by people going on summer holidays and spending on experiences over items, he commented.
Retail spending peaked at the start of the month, and then again just before the late August Bank Holiday as people hit the shops before going away. He says this brief spike in spending was a welcome boost to high street retailers.
It remains a challenge, however, for retailers to get shoppers through the door and onto their websites, he adds. Retailers now need to be aware of the effects of prolonged inflation and consider the impact if credit cards become less freely available and shoppers have less spending power.
“Retailers need to prepare for the squeeze on consumer spending and consider offering consumers flexible payment options such as the ability to spread the cost of purchase,” he cautions. “This will ensure retailers are in a position to thrive and not just survive in these uncertain times.”
Alex Marsh, courtesdy of Close Brothers Retail Finance
Kingfisher a model
The ONS might point to the half-year results published by UK retailer Kingfisher this morning as a real life model. Kingfisher reported sales rose 4.5% in the first six months to 31 July compared to the same period a year earlier. This year is year two in the company's five-year transformation plan. Profit, though, rose just 0.5% and net cash fell by around a quarter. The share price rose by 5.8%.
The figures have a broader economic relevance that stretches beyond the merely statistical. Jake Trask, foreign exchange research director at Australia Securities Exchange-listed currency specialist OFX, said the higher than forecast figures sent sterling rocketing through 1.36 against the US dollar.
He sees the ONS figures as further evidence that the Bank of England needs to raise interest rates sooner rather than later in an effort to get inflation back under control. He thinks that move could come as early as November.
Ruth Gregory, UK economist at The ONS might point to the half-year results published by UK retailer Kingfisher this morning as a real life model. Kingfisher reported sales rose 4.5% in the first six months to 31 July compared to the same period a year earlier. This year is year two in the company's five-year transformation plan. Profit, though, rose just 0.5% and net cash fell by around a quarter. The figures have a broader economic relevance that stretches beyond the merely statistical. Jake Trask, FX Research Director at Australia Securities Exchange-listed currency specialist OFX, said the higher than forecast figures sent sterling rocketing through 1.36 against the US dollar. He sees the figure as further evidence that the Bank of England needs to raise interest rates sooner rather than later in an effort to get inflation back under control. Ruth Gregory, UK economist at Capital Economics, shares that view. “A modest pick-up in household spending should help the economy to re-accelerate a little ahead and adds weight to our view that the MPC (Monetary Policy Committee) will hike interest rates in November,” she says." Capital Economics, shares that view. “A modest pick-up in household spending should help the economy to re-accelerate a little ahead and adds weight to our view that the MPC (Monetary Policy Committee) will hike interest rates in November,” she says.
