The UK retail sector saw an unexpected rise in sales in September, surprising analysts who had predicted a decline.
- Retail transactions increased by 0.3% in September, following a strong 1% growth in August, contrary to a forecasted 0.4% drop.
- Technology equipment sales surged, compensating for a decline in supermarket spending as consumers cut back on luxury food items.
- The rise in sales precedes a crucial budget announcement, raising concerns over potential tax increases and spending cuts.
- Consumer confidence showed signs of fragility, with a significant drop in the GfK consumer confidence index due to economic uncertainty.
The UK retail sector demonstrated resilience in September with a 0.3% increase in sales, defying analysts’ expectations of a 0.4% decline. This increase followed a 1% growth in August. Despite this positive trend, sales remain 0.2% lower than pre-pandemic levels, highlighting the challenges faced by the sector.
Strong sales in technology equipment notably offset weaker supermarket performance, where consumers reduced spending on luxury food items due to rising costs. Senior statistician at the Office for National Statistics, Hannah Finselbach, observed that technology stores saw a notable increase in sales, compensating for the slower supermarket sales caused by adverse weather and cautious consumer spending.
Erin Brookes from Alvarez & Marsal attributed the growth to increased demand for warm clothing, driven by record rainfall and early winter chills. She noted that while consumer budgets are less strained than a year ago, uncertainty ahead of the autumn budget could affect consumer confidence.
Oliver Vernon-Harcourt from Deloitte identified a ‘back-to-school boost’ in September, with strong sales in computers and clothing. However, he highlighted that consumers were cautious about big-ticket purchases, relying instead on smaller non-essential items to sustain sales values.
This retail growth precedes Chancellor Rachel Reeves’s upcoming budget, which is expected to include significant tax increases and spending cuts. The announcement has raised concerns among consumers and businesses about the economic impact. The GfK consumer confidence index reflected these concerns, dropping from minus 13 to minus 20 in September, indicative of the growing cost-of-living anxieties and potential economic measures.
Despite current challenges, improvements in the economic outlook may support future retail growth.
