In August, UK retail sales soared, marking a significant two-year high.
- Annual retail sales volumes increased by 2.5%, outpacing forecasts by 1%.
- Month-to-month sales rose by 1%, with end-of-season promotions driving growth.
- Supermarkets led the surge, recording the largest annual food sales rise since 2021.
- A brighter outlook for consumer confidence is anticipated as inflation declines.
In a notable economic upturn, UK retail sales in August surged to their highest level in two years, propelled by robust consumer engagement with summer deals. This trend was highlighted by the Office for National Statistics (ONS), which reported a 2.5% annual increase in retail sales volumes, surpassing the predicted 1.5% rise. This marks the most substantial performance since July 2022 and builds on the upward revision of July’s growth figures to 0.7% month-on-month.
The monthly sales increase of 1% was particularly driven by consumers capitalising on end-of-season sales. The retail sectors that witnessed significant growth included food, clothing, footwear, and household items, with supermarkets experiencing remarkable success. Indeed, supermarkets enjoyed their most successful month since July 2021, significantly contributing to an increase in food sales.
Grant Fitzner, Chief Economist at the ONS, observed that this increase in supermarket sales was closely linked to easing inflation rates. “Supermarkets saw their best month since July 2021, with food sales rising as inflation continues to ease,” stated Fitzner. This corresponds with a year-on-year food spending increase of 1.6%, facilitated by a reduction in food price inflation to 1.2%.
As inflation eases, consumer confidence is expected to improve, further bolstering retail sales. The Bank of England has maintained its base rate at 5%, yet there is widespread anticipation of lower interest rates before the end of the year, potentially relieving household budgets. Although total household spending remains slightly below pre-pandemic levels, retail prospects are gaining momentum.
Retailers are optimistic about the upcoming months, particularly concerning sales of autumn and winter apparel. Erin Brookes, Managing Director at Alvarez & Marsal, voiced enthusiasm for this anticipated consumer behaviour, expressing hope that the cooler weather will stimulate further spending.
The surge in retail sales reflects improving economic conditions, promising an optimistic outlook for UK retailers.
