Retail sales volumes plummet as inflation takes its toll

Total sales rose 2.3% in July, compared with a 6.4% uplift in July last year, which was below the three- and 12-month averages of 0% and 2.7%.

UK retail sales grew 1.6% on July 2021 when they had jumped 4.7%, according to the latest data from the BRC-KPMG Retail Sales Monitor.

This was largely driven by an increase in food sales, which were up 2.3% on a total basis in the three months to July and 1.8% on a like-for-like basis.

For the month of July alone, food was in growth.

Non-food categories, however, slumped 2% on a total basis and 2.5% on a like-for-like basis over the three-month period to July.

This was below the 12-month total average growth of 4.5% but non-food was still in growth in July alone.

In-store sales of non-food items increased by 2% on a total basis and 1.2% on a like-for-like basis over the three-month period as shoppers favoured bricks and mortar.

Online non-food sales declined 3.9% in July against a slight decline of 0.6% in the same month last year.

The online non-food penetration rate decreased to 39.5% in July from 42.3% at the same point in 2021.

British Retail Consortium chief executive Helen Dickinson said: “Sales improved in July as the heatwave boosted sales of hot-weather essentials. Summer clothing, picnic treats and electric fans all benefited from the record temperatures as consumers made the most of the sunshine.

“However, with inflation at more than 9%, many retailers are still contending with falling sales volumes during what remains an incredibly difficult trading period. Consumer confidence remains weak and the rise in interest rates coupled with talk of recession will do little to improve the situation.

“The Bank of England now expects inflation to reach more than 13% in October when energy bills rise again, further tightening the screws on struggling households. This means that both consumers and retailers are in for a rocky road throughout the rest of 2022.”

KPMG head of retail Paul Martin added: “The sun came out for retailers in July as like-for-like sales grew 1.6% on last year. Against a backdrop of the cost-of-living crisis and ongoing reports of low consumer confidence, actual sales are still holding up. Online retailers also saw the benefit of warmer weather, with sales growth falling more slowly, by just 3.9% on July 2021. 

“Despite consumer polls suggesting confidence is at an all-time low, this hasn’t translated to money not being spent at the tills as consumers are determined to enjoy delayed holidays and an unrestricted summer. 

“Pent-up demand, especially for new clothes, has so far been at significant enough levels to keep the overall retail sector in relatively good health. With travel and summer socialising back on the agenda, retailers will be hoping the feel-good factor continues into August.

“However, the summer could be the lull before the storm, with conditions set to get tougher as consumers arrive back from summer breaks to holiday credit-card bills, another energy price hike and rising interest rates. With stronger cost-of-living headwinds on the horizon, consumers will have to prioritise essentials and discretionary product spending will come under pressure.

“As margins continue to be challenged, and with costs continuing to rise, a significant drop in demand come the autumn will have a detrimental impact on the health of the retail sector. Truly understanding individual customer buying patterns and being able to differentiate these will become increasingly more important for the sector.”