Olympics on the TV and sunshine outside kept shoppers away from the high street in August and knocked retail sales, according to new industry data.
The latest snapshot of takings for shops, online stores and supermarkets from the British Retail Consortium (BRC) showed sales dropped 0.9% on a year earlier, in like-for-like terms. That contrasted with growth of 1.1% in July and was the weakest performance since April.
But there were some bright spots for retailers as the warm weather boosted sales of barbecues and wine. Watches and jewellery was the strongest performing category for the second month running as the pound’s post-referendum weakness again attracted tourists to the UK to snap up cheaper luxury goods.
The figures add another piece to the puzzle over how consumer spending and the wider economy have fared since the June referendum. Despite warnings before the poll that a vote for Brexit could spark a recession, so far consumer spending appears to have held up although there are signs both households and businesses are nervous about the UK’s economic outlook.
In the BRC report, it appeared that the weather and the timing of the new school term had by far the greatest impact on spending in August.
Footwear was the worst performing category in August in the BRC report, compiled with consultants KPMG and covering the four weeks to 27 August. The report’s authors blamed the comparatively late start to the new school term for the worst decline in children’s shoe sales since April 2008 but said there were signs the dip would be offset by back-to-school trade in September.
Home accessories, toys and baby equipment and furniture all suffered a dip and clothes sales were weaker as hot weather dampened demand for new autumn ranges.
“A month of extraordinary achievement for Team GB certainly produced a feel-good effect and consumer confidence was up on July, but that generally didn’t translate into extra sales,” said Helen Dickinson, the BRC’s chief executive.
“Consumers were enticed towards leisure and outdoor activities rather than shopping, although food did post its strongest performance in more than two years, fuelled by demand for picnic, barbeque supplies and celebratory drinks.”
The trend for spending on going out was reinforced by separate figures from Barclaycard suggesting a pick-up in overall consumer spending in August was helped by people splashing out on holidays and entertainment.
Consumer spending rose 4.2% in August, the fastest year-on-year growth for 13 months, according to Barclaycard, which processes around half of UK credit and debit card transactions. In contrast to the BRC retail report, Barclaycard found spending on clothes grew at a faster pace in August, up 3.4% on the year after a 1.5% rise in July.
Spending in pubs was up 13.3% on the year, spending in restaurants rose 12.7% and cinema spending increased 14.6% on the year, helped by the release of Finding Dory.
But Barclaycard’s latest snapshot of consumer sentiment showed people were still cautious about the outlook. A poll of 1,660 people by YouGov for the cards company showed only 58% expressed confidence in their household finances, significantly lower than the average of 71% recorded in 2015. Only four in 10 said they were confident in the UK economy.
“Consumer spending has continued to grow after the EU referendum, with August being a particular stand-out month considering confidence in household finances remains low compared to levels seen last year,” said Paul Lockstone, managing director at Barclaycard.
“Confidence continues to be shaky as the wider economic picture remains uncertain, suggesting it’s too soon to tell if this lift in spending will last once everyone’s holiday tans have faded.”
The BRC also cautioned against reading too much into one month’s figures or drawing strong links to June’s vote to leave the EU.
Dickinson said: “As we’ve seen in the last couple of months, data portending the health of the economy paint a volatile picture. 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.”
Official data on August retail sales will be released next week. The July figures showed a rise in sales, echoing other consumer spending reports and suggesting consumers were not put off spending by the vote to leave the EU in June’s referendum.
