ONS Retail Sales Continue to Slow in August
The ONS Retail Sales Index for August shows that sales values slowed to their lowest level since the industry came out of the lockdown period at the beginning of the year, while volumes fell into decline year on year. The easing of social restrictions continued to increase the appeal of hospitality, which had a detrimental effect on Food sales, with Non-Food hampered by waning demand for homewares and computing equipment as many prepare for their return to office working. In contrast, Clothing stores performed well, spurred on by these very same factors. While Online sales values increased from that seen in July, they were down on the levels seen at the same point last year. These results echo those we reported in the BRC-KPMG Retail Sales Monitor for August, released on the 7th September.
According to the ONS, retail sales growth slowed to a mere 1.4% in August, which is the slowest rate since the industry emerged from the first quarter lockdown. This confirmed the results from our Retail Sales Monitor published two weeks ago, that was first to highlight sales slowing for four consecutive months.
Month-on-month, expectations were that sales values would rebound slightly from the previous month’s fall of -0.8%, to somewhere in the region of +0.2%. However, this did not come to pass as sales were down once again, with -0.6% from that spent in July, which will disappoint many in the industry.
The ONS’s series for Large Businesses saw growth of 3.1%, which is the series most aligned with our own Retail Sales Monitor, that recorded 3.0% growth for August year on year. The graph below shows how much value large retail businesses contributed to the overall result in August, with their performance counterbalancing that of the disappointing results posted by small retailers.
Demand has certainly waned since the heights seen in the post-lockdown period in April. The increased availability and appeal of the returning hospitality sector has naturally affected the Food side of consumer spending, with predominantly food stores seeing growth of only 0.2%. However, Food sales are also burdened by their own success last year, as stores in this sphere were recording stellar growth rates for the majority of 2020. Non-Food stores saw growth slow as well, with much of the enthusiasm for retail therapy satisfied as consumers prepared for the summer months. Clothing continued to perform well, as more people return to the office day by day, and social calendars are continuing to fill up once again. While online spending increased from July, on a year-on-year basis sales values were down for the channel, which was also in line with our Retail Sales Monitor for August.
The spike in price inflation seen over the last couple of months also played a large part in consumer purchasing decisions, with volumes bought falling for the first time since February by -0.9%. As our Economist, Dr Liliana Danila, explained earlier this week, the ‘base effects’ from falling prices this time last year are contributing to rises this time around, but the supply chain issues across the industry are providing the strongest upward pressure on prices, which show no sign of easing in the near term. This could lead to many consumers tightening their belts further in the coming months, which does not bode well for the industry with the ‘golden quarter’ looming large on the horizon.