Cautious consumers stall spending

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The British Retail Consortium reported that UK total retail sales increased by 2.5% in October, against a growth of 1.6% in October 2022. This was below the 3-month average growth of 3.1% and the 12-month average growth of 4.2%.

Non-Food sales decreased 1% on a total basis over the three-months to October. This is below the 12-month average growth of 0.6%. For the month of October, non-food was in decline year-on-year.

Over the three months to October, in-store non-food sales decreased 0.1% on a total basis since October 2022. This is below the 12-month average growth of 3%.

Online non-food sales decreased by 2.5% in October, against a decline of 6.3% in October 2022. This was shallower than the three-month decline of 2.7% and deeper than the 12-month decline of 2.9%.

The proportion of non-food items bought online (penetration rate) decreased to 36.5% in October from 36.6% in October 2022.

Helen Dickinson OBE, chief executive of the BRC, said: “Retail sales growth slowed as high mortgage and rental costs further shook consumer confidence. Many households are also delaying their Christmas spending in the hopes they can grab a bargain in the upcoming Black Friday sales.

“Retailers continue to invest in lowering prices and streamlining their operations, part of their commitment to delivering an affordable Christmas for their customers. But this is put at risk by the £470 million-per-year rise in business rates facing retailers next year. The Chancellor must freeze rates in the upcoming Autumn Statement, to prevent extra cost pressure, pushing up prices for struggling consumers.”

Paul Martin, UK head of retail at KPMG, said: “Retail sales remained weak in October with growth of just 2.5%. Online sales continued to struggle, with negative sales growth recorded in every category other than health and other non-food. This could herald the most competitive Black Friday period that we’ve seen in a while.

“Whilst consumers are now operating in a lower inflationary environment compared to October last year where inflation peaked at over 11%, there is no doubt that the last 12 months have taken a toll on confidence and their ability to spend.”

Mr Martin continued: “Although the retail sector has done some sterling work around controlling their own cost environment, the health of the industry is at the mercy of macro demand.

“Retailers are facing a challenging Christmas, competing for a shrinking share of wallet, driven by promotions that will no doubt cut into already stretched margins. With spending levels expected to be much more muted this year, the run up to Christmas could be the most challenging we’ve seen since pre-pandemic days.”

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