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Home > News > Retailers ...

Retailers urge 'shoppers' budget' as figures point to squeeze

Pre-Christmas trading off to poor start with weakest growth non-food spending in more than five years, says BRC

Britain’s hard-pressed retailers have urged the chancellor to deliver a budget for shoppers later this month after the latest snapshot of activity in the high street showed consumers under further pressure in October.

The British Retail Consortium said like-for-like sales in October had fallen 1% compared with the same period last year. The key pre-Christmas trading period had started poorly for both stores and online traders, the BRC said, warning that the recent rise in interest rates from the Bank of England threatened to make consumers even more cautious.

“Considering the intrinsic link between consumer spending and economic growth, the chancellor should reflect on this disappointing state of play and deliver a budget that allays the risks of a further slowdown in consumer spending, by keeping down the cost of living. In other words, a shoppers’ budget,” said the BRC chief executive, Helen Dickinson.

The figures were released as car sales posted their seventh successive monthly decline, falling more than 12% in October against a backdrop of weak consumer and business confidence.

The BRC-KPMG monthly retail sales monitor found that in-store sales of non-food items were down 2.1% on a year earlier – the sharpest rate of decline since BRC records began recording the category in January 2012. Annual growth in total non-food items – which includes internet shopping – stood at 0.2%, the lowest since the BRC started measuring the data in 2011, shortly after the economy began to recover from its deepest post-war recession.

Although official retail sales figures do not always reflect survey evidence, the BRC-KPMG report adds to recent evidence that the squeeze on real incomes caused by higher inflation is making consumers unwilling to spend. The CBI reported last month that retail sales were dropping at their fastest pace since the economy was contracting sharply in the spring of 2009.

Meanwhile, the credit card company Barclaycard said on Tuesday that consumer spending growth of 2.4% was running below the current 3% inflation rate as households cut back on “nice-to-have” goods and concentrated their limited budgets on essentials.

Philip Hammond’s scope for a giveaway budget on 22 November will be constrained by an expected cut to about 1.5% a year in the economy’s potential growth rate by the independent Office for Budget Responsibility. Even so, retailers are pressing the chancellor for measures that would increase consumer demand or cut retailers’ costs.

Referring to a total October growth number of 0.2%, which includes stores open for less than year, the BRC’s Dickinson said: “It was a meagre month in October for retail sales as shopping activity slumped. With total growth at its lowest since May and below the 12-month average, retailers will have cause for concern as they prepare for the crucial run up to Christmas.”

Dickinson added that consumers appeared to have spent their cash on outdoor experiences and excursions during half term rather than visit the shops. Over the three months to October, food sales increased 2.4% on a like-for-like basis but the BRC said spending figures in supermarkets had been boosted by price inflation.

“Real consumer spending power has been on a downward trend in the last year as the acceleration in inflation has caused shoppers to become ever more cautious in considering what purchases they can afford,” Dickinson said. “Many now face higher borrowing costs, given the rise in interest rates, which will only serve to heap further pressure onto household finances.”

Meanwhile, the Society of Motor Manufacturers and Traders said the car market was on course for its first annual decline since 2001 and would continue to weaken in 2018 before stabilising in 2019, as sales for October declined by 12.2% year on year.

Mike Hawes, the SMMT chief executive, said: “Declining business and consumer confidence is undoubtedly affecting demand in the new car market but this is being compounded by confusion over government policy on diesel. Consumers need urgent reassurance that the latest, low-emission diesel cars on sale will not face any bans, charges or other restrictions, anywhere in the UK.”

Paul Martin, head of retail at KPMG, said: “With the Bank of England’s interest rate decision seeing the first hike in ten years, we are likely to see a continuation of the sector’s slowdown, with consumers having less disposable income to spend. The autumn budget also nears closer and retailers will most likely be hoping for some form of relief, particularly after the challenges business rates created.”

 

Source: The Guardian

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