The growth in retail sales seen over the last few months slowed in August, as pent-up consumer demand post-lockdown mellowed.
Retails sales climbed by 3% in August, boosted by workers buying new clothes as they returned to the office and by children going back to school, according to the latest Retail Sales Monitor from the British Retail Consortium (BRC) and KPMG.
However, the August rise was below the 3.9% increase seen in July, suggesting that demand that built up during the first-quarter lockdown has now been satisfied.
Online sales dropped by 4.6% last month, compared with 42.4% growth in August last year, as shoppers returned to physical stores, the data revealed.
Online’s share of total non-food sales declined to 38.3% in August compared to 42% during the same month a year earlier.
Food sales grew by 2.9% in the three months to August, below the 12-month average of 5.4%.
Helen Dickinson, chief executive of the BRC, commented:
“As the post-lockdown pent-up demand has mellowed, the growth in retail sales we have seen over the past few months slowed for August. Despite this, the month still saw growth above pre-pandemic levels, as rising consumer confidence and footfall levels led to a boost in in-store sales.
“While online sales have begun to slow, they were still high, demonstrating how the pandemic has shifted the digital-physical shopping balance.”
Don Williams, Retail Partner at KPMG, said: “With the retail recovery showing signs of slowing, the sector is expected to grow at a more muted rate as retailers face increasing challenges on a number of fronts.
“Inflation is expected to accelerate, putting pressure on household spending, whilst retailers battle for share of wallet as consumers spend money on leisure, entertainment and travel.
“Staffing pressures remain and supply chain issues are being widely reported, with raw material shortages and challenges getting product into the UK and getting goods into customers‘ hands. This may feed into limited availability of certain products and the spectre of price rises remains. “
Meanwhile, data from Barclaycard suggested consumers are spending more on leisure and entertainment.
The bank said spending rose 15.4% in August compared with the same period in pre-pandemic 2019, up from 11.6% in July. Spending on theatre, festival and theme park tickets accounted for 24.2% of total spending to reach a new high.
All leisure sectors, apart from international travel, grew including restaurants, which rose for the first time in more than 17 months, Barclaycard said.
“Consumer confidence has reached its highest point since February 2020, yet concerns about rising inflation are causing many Brits to make lifestyle changes,” it said.
Analysts at Pantheon Macro said they expect the recovery in households’ overall spending to slow over the coming months, as inflation picks up, the furlough scheme is halted and the value of universal credit returns to its pre-Covid level.
“A renewed pick-up in Covid-19 cases, enabled by the reopening of schools and declining vaccine effectiveness, might also mean that some households hunker down again in the winter,” they said.
“As a result, we continue to expect households’ spending to take until Q2 2022 to return to its Q4 2019 level, having undershot its peak by 7.0% in Q2.”