UK retail sales deteriorated in August, says British Retail Consortium

UK retail sales deteriorated unexpectedly in August, clocking the weakest performance in two years, according to a monthly report from the British Retail Consortium and KPMG.

Total sales fell 0.3 per cent year on year in August, compared with a 1.9 per cent gain in July. Excluding Easter distortions, that is the weakest monthly performance since September 2014.

Like-for-like sales fell 0.9 per cent, down from a 1.1 per cent gain in July and well below the 1.4 per cent gain forecast by economists.

Clothing recorded its worse three- month average performance since February 2009, the report said.

The deterioration comes as a disappointment after shoppers seemingly shrugged off the economic uncertainty surrounding the vote to leave the EU, with retail sales showing an impressive gain in July, according to both the BRC and the Office for National Statistics.

But British Retail Consortium chief executive Helen Dickinson cautioned:

Care should be taken in reading too much into August’s lacklustre performance. As we’ve seen in the last couple of months, data portending the health of the economy paint a volatile picture.

She added:

The fact is that so far little has directly changed for the UK’s consumers as a result of the referendum, so it’s the pre-existing market dynamics that are still driving sales. The slowdown in real wage growth in the first half of 2016 and strong competition will continue to weigh on trend growth in total sales; whilst holiday timings, promotional and seasonal activity will contribute to fluctuations month on month.

David McCorquodale, head of retail at KPMG said:

In contrast to July, August’s retail figures illustrate somewhat of a U-turn of retail fortunes. Like-for-like sales were down 0.9 per cent on this time last year – painting a disappointing picture given previous signs of encouragement.

Sales of women’s fashions performed particularly poorly, despite widespread promotions. The warmer weather made it almost too hot to shop and dissuaded shoppers from looking at the newly arrived autumn products.

But on a brighter note, he highlighted a boost from the drop in sterling, which has also benefitted exporters, according to recent business surveys.

Mr McCorquodale said:

Jewellery sales continued to benefit from international shoppers taking advantage of the weaker pound. Whilst for those at home, some of whom may have opted for a staycation given the exchange rate, the warmer weather put wine and barbeques firmly on the menu – much to the delight of food and drinks sellers.

On a three-month basis, total food sales rose 0.9 per cent, the best showing since December 2013 excluding Easter distortions. That was comfortably ahead of the 12-month average of 0.3 per cent, and comes as a welcome boost for grocers, which have been under pressure from intense competition and price deflation over the last few years.