British retail sales rebound as shoppers return to high streets

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British retail sales rebounded in August boosted by spending on food and clothing, according to official data published on Friday.

The quantity of goods bought in Great Britain increased by 0.4 per cent between July and August, following a drop of 1.1 per cent in July when rain deterred shoppers, the Office for National Statistics said.

August’s growth was slightly below the 0.5 per cent expansion forecast by economists in a Reuters poll.

Heather Bovill, ONS deputy director for surveys and economic indicators, said: “Retail recovered a little from the large fall seen in July, driven by a partial bounce back in food and a strong month for clothing, though sales overall remain subdued.”

In the three months to August, a less volatile measure of the trend, sales were up 0.3 per cent compared with the previous three months.

Separate data published on Friday by research company GfK showed that UK consumer confidence rose to the highest level since January 2022 in September.

Over the past two years, high inflation and rising mortgage rates have hit households’ finances, affecting how much they spend on the high street and online.

However, a relatively low unemployment rate, easing price rises, strong wage growth and a correction in mortgage rates from their recent 15-year peak helped support consumer spending in August, according to economists.

The Bank of England on Thursday voted to hold interest rates at 5.25 per cent after 14 consecutive increases since December 2021, which means borrowing costs are no longer rising.

Alex Kerr, economist at consultancy Capital Economics, warned that “while the worst of the falls in real household disposable incomes are behind us, the full drag on activity from higher interest rates has yet to be felt”.

He said he expected consumer spending to decline by 0.5 per cent from peak to trough over the coming quarters.

In August, the value of retail sales was down 1.5 per cent compared with February 2020, before the Covid-19 pandemic, even though shoppers spent 17.3 per cent more, reflecting the impact of high inflation.

ONS data showed that clothing stores last month benefited the most from the milder weather, posting a 2.3 per cent expansion that largely made up for the 2.9 per cent fall in July.

Sales volumes at food stores also rose 1.2 per cent in August, recovering only part of the 2.6 per cent fall in the previous month.

Despite the partial rally, food sales remained 4.1 per cent below their pre-February 2020 levels. The ONS said retailers had continued to indicate pressure on sales volumes because of food prices and the increased cost of living.

Internet sales dropped slightly in August as some consumers returned to shopping in person following a very wet July, the statistics agency said.

Fuel sales also fell 1.2 per cent, with retailers suggesting the drop was linked to a sharp increase in petrol and diesel costs.

Lisa Hooker, industry leader for consumer markets at consultancy PwC, said: “The hope is that the impact of recent mortgage interest rate rises and increasing petrol prices do not derail the green shoots that have appeared in time for the critical run-up to Christmas.”