Is the UK on the cusp of a ‘vibecession’?

Four different UK retailers issued financial updates today, across three separate categories: fashion, home, and DIY and grocery.

On first inspection, none of the updates were particularly bad. In fact, on the topline numbers, they were all relatively positive – some more than others, with DFS even issuing a profit upgrade.

But across the board, the four retailers all noted some version of the same theme: market and consumer confidence remained muted, and the second half of the year could well prove to be just as challenging as the first.

“Amidst muted consumer confidence, we are not standing still waiting for a recovery,” Dunelm’s departing chief executive Nick Wilkinson noted.

“We are instead focused on delivering relevance to our customers, to help build greater trust in the quality, value and breadth of our offer, harnessing our unique strengths as a multi-category specialist.”

Frasers Group chief financial officer Chris Wootton struck a similar theme, even when noting that the retailer’s Flannels luxury department was seeing some “green shoots” of recovery.

“We’re starting to see some improvement in luxury, but we’re not going to jump up and down about it just yet, because we want to see how it goes,” he said.

“We’ve started seeing some early green shoots in our premium section, and Sports Direct continues to grow. But we don’t want to suddenly say ‘we’ve turned it around’, because I think we need to see what’s going to happen in the next six to 12 months”.

It begs the question, is the UK sliding into a ‘vibecession’ – where customers stick resolutely to recessionary spending habits, despite the broader economic indices being more positive?

There are two major issues facing both retailers and consumers at the moment. The first being that inflation hit 3.6% in June, according to the most recent data from the Office for National Statistic – the highest rate of inflation since the start of 2024.

The two main driving factors behind this jump were fuel and food costs – both non-discretionary items of spend for consumers. But even in the food space, retailers like Ocado aren’t revelling in surging sales.

While chief executive Tim Steiner today noted “Ocado Retail has maintained its position as the fastest-growing grocer in the UK, reflecting strong customer growth and continued market share gains”, the pureplay grocery brand is eating into margins by spending huge amounts on new customer acquisition.

While retailers may be looking nervously at rising inflation numbers, global FDD leader and retail, consumer and leisure specialist at PwC Lisa Hooker says the situation in the UK isn’t as bad as it is in the US – where inflation hit 9% in June, as Trump’s game of tariffs roulette began to bite.

While she says the UK consumers are still prioritising value and limiting spending to “special occasions”, the “cost-of-living crisis and food inflation have gone in terms of concerns for customers holding back spending”.

While inflation, at least for now, isn’t as big an issue for consumers, another economic headwind has begun to rear its head: a weakening job market.

Unemployment hit 4.7% in May, its highest level in four years, while the number of job vacancies has been falling continuously for the last three years.

Historically, while high inflation sees consumers be more conservative with their spending habits, rising unemployment may see the spending go into full recession mode.

PwC’s Hooker says this is likely to effect younger cohorts more specifically who will be “concerned about job security” in the future, which may make them more cautious spenders, to go along with older cohorts who have more money, but are more cautious spenders regardless of the economic weather.

As we move into the second half of the year, retailers across categories are already beginning to look towards Christmas.

As Hooker says, if inflation or unemployment continue to rise heading into autumn, retailers could well be in for another “dull Golden Quarter and Christmas period”.