Retail sales in the United Kingdom have reached a two-year high in August, driven by a surge in consumer spending on summer deals and food. The Office for National Statistics (ONS) has reported an annual increase of 2.5 per cent in retail sales volumes, surpassing the anticipated 1.5 per cent rise. This marks the most robust performance since July 2022 and an acceleration from the 1.4 per cent growth observed in July.
Month-on-month, retail sales climbed by 1 per cent, with the previous month’s figure revised upwards to 0.7 per cent. Consumers have notably increased their expenditure on food, clothing, footwear, and household items, spurred by end-of-season sales. Supermarkets have particularly benefited, reporting the largest annual rise in food sales since the summer of 2021.
Grant Fitzner, chief economist at the ONS, highlighted, “Supermarkets saw their best month since July 2021, with food sales rising as inflation continues to ease. However, total retail sales remain just below pre-pandemic levels.” Food spending has risen by 1.6 per cent year-on-year, bolstered by a decline in food price inflation to 1.2 per cent.
Consumer confidence is expected to grow in the coming months as lower inflation and falling interest rates provide relief to household budgets. The Bank of England has recently maintained its base rate at 5 per cent but is anticipated to lower rates by the year’s end. Although overall household spending has not fully recovered to pre-pandemic levels, the outlook for retailers appears to be improving.
Erin Brookes, managing director at Alvarez & Marsal, commented, “With cooler weather approaching, retailers are optimistic that spending on autumn and winter apparel will rise in the coming months.”
While retail sales have demonstrated significant growth, the sector still faces challenges in fully returning to pre-pandemic levels. However, the easing of inflation and prospective interest rate cuts suggest a favourable environment for continued consumer spending, offering a promising outlook for retailers.