Retail sales in July experienced a modest increase, rising by 0.5 percent compared to the same month last year. This growth is a slowdown from the 1.5 percent increase observed in July 2023 and falls below the 12-month average growth of 1.4 percent.
Food Sales Lead the Way
Food Sector Sees Continued Growth
The food sector remained a strong performer, with sales rising 2.6% year-on-year over the three months leading to July. This is a decrease from the 8.4% growth recorded in July 2023 but still higher than the 12-month average growth of 5.3%. This trend highlights consumers’ prioritization of essential goods amid fluctuating economic conditions.
Non-Food Sales Decline
Conversely, non-food sales suffered a decline, dropping 2.7% over the same three-month period. This segment’s performance underscores the ongoing challenges faced by non-essential retail categories, including a significant dip in sales of indoor goods like furniture and household appliances.
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Impact of Seasonal Trends
Late Summer Boosts Certain Categories
The delayed onset of summer brought a surge in demand for summer clothing and health and beauty products, as consumers geared up for outdoor activities and vacations. BRC Chief Executive Helen Dickinson noted that the increase in food purchases and summer-related items was a key driver of the overall sales growth.
Helen Dickinson, Chief Executive of the British Retail Consortium (BRC), commented on the trends:
Retail sales grew due to increased food purchases. The late arrival of British sunshine led to higher sales in summer clothing and health & beauty products as consumers prepared for outings and vacations. However, increased spending on holidays and entertainment squeezed out sales of indoor goods like furniture and household appliances, leading to negative growth in non-food categories, especially for in-store purchases.
Entertainment and Holidays Influence Spending
The report also highlighted a shift in consumer spending towards holidays and entertainment, which negatively impacted sales of indoor goods. This trend indicates a consumer preference for experiences over material goods, likely influenced by the summer season.
Retailer Insights
Retailers Navigate Mixed Market Conditions
Linda Ellett, KPMG UK’s head of consumer for retail and leisure, remarked that while health, beauty, and gardening products contributed to retail sales growth both online and in-store, the overall increase was less than anticipated. Retailers had hoped for a more significant boost during this crucial period.
Televised Sports Drive Electronics Sales
The summer of televised sports events played a beneficial role, particularly in driving sales of televisions, mobiles, and tablets over the past two months. However, there was little evidence of substantial spending on other big-ticket items, reflecting cautious consumer behaviour.
Economic Considerations
Household Budgets Under Pressure
Economic factors continue to influence consumer spending patterns. Many households are grappling with rising costs, including mortgage and rent increases, which have constrained their spending capacity. Ellett emphasized that household spending levels are heavily influenced by these financial pressures.
Wage Growth and Job Security
The disparity in wage growth across different sectors and the reduction of posts in some areas have also made consumers more cautious. The uncertainty in job security has prompted some to rely on savings as a safety net, affecting their overall spending behaviour.
Outlook for Retail Sector
Future Prospects Remain Uncertain
The modest growth in July sales offers a mixed outlook for the retail sector. While certain categories have benefitted from seasonal trends, the broader market remains constrained by economic challenges. Retailers will need to continue adapting to changing consumer preferences and economic conditions to navigate the months ahead.
Expert Insights
Retail Sales Show Modest Growth Amid Economic Challenges
KPMG UK head of consumer for retail and leisure Linda Ellett added:
“While summer staples, such as health, beauty, and gardening products have helped to drive retail sales growth both online and in-store in July, the upturn is likely much less than retailers were hoping for at this key time of the year.
“A busy summer of televised sport has played a beneficial role in increasing TV, mobile and tablet sales over the last two months, but there’s little evidence of other big ticket purchases taking place.
“Spending levels continue to be governed by whether households have been able to absorb the likes of mortgage and rent increases, or had to limit their spend elsewhere as a consequence.
“Also, while some sectors are seeing wage growth, others are cutting posts – leaving some consumers mindful that they may need to fall back on savings if they find themselves out of work.”
The retail sector experienced a modest growth in July, buoyed by seasonal spending on food and summer-related products. However, economic pressures and shifting consumer priorities present ongoing challenges for retailers. As the sector moves forward, a keen understanding of these dynamics will be essential for sustaining growth.
