To reiterate: Never. Underestimate. The Great British shopper.
UK retail sales have now been growing for a full year, with the annual pace of quantities sold standing at 2.4 per cent in August, according to the ONS. That’s 1.3 percentage points above economists’ forecasts and comes after a (revised) gain of 1.4 per cent in July.
Sales excluding fuel jumped by some 1 per cent in the month, from 0.3 per cent in July and well above the 0.2 per cent expected by economists in a Reuters poll.
That suggests Brits are splashing out. As the ONS says:
Year-on-year contribution of food stores remains flat whilst there was a fall in the contribution of growth within petrol stations, showing that contributions to the overall growth came from non-essential items.
Of course, as Kate Davies, ONS senior statistician pointed out, inflation is playing a role here:
Within this month’s retail sales we are seeing strong price increases across all store types compared with a year ago, reflecting wider inflationary pressures. However, we are still seeing underlying growth in sales volumes, and with strong growth in non-essential purchases as consumers continued to buy more from non-food stores.
Sales growth also beat expectations in July and has defied expectations by holding up after last summer’s Brexit referendum. But rising inflation and anemic wage growth has led to the first fall in real incomes in more than two years for British workers this year.
The Bank of England expects inflation to rise to 3 per cent by October before falling again during the next 12 months. Average wage growth, however, remains stuck about the 2 per cent mark.
Lloyds Bank’s head of retail, Keith Richardson, said:
Like last month, overall growth in sales hides growing challenges for the high street in particular.
Shoppers are tightening their belts on things like homewares and entertainment in favour of a few little luxuries in the weekly shop.