UK retail sales in August witnessed an unexpected surge, primarily driven by the grocery sector, according to the Confederation of British Industry (CBI). Although fashion retailers did not share the same level of success, the overall retail sales for the month marked the strongest growth in nine months.
The CBI’s retail sales balance for August showed a significant improvement, rising from -4 in July to +37. However, the CBI emphasized that sales during this period were considered average. Furthermore, online retail sales volumes continued to decline compared to the previous year, albeit at a slower pace than previous months.
Despite the positive retail sales figures, there is a prevailing sense of pessimism among businesses. Martin Sartorius, principal economist at the CBI, highlighted that firms remain skeptical about their business situation in the months ahead, to a greater extent than during the first Covid-19 lockdown in 2020. This sentiment is reflected in their expectations to decrease capital expenditures over the next 12 months, which continue to be negative.
In terms of inflation, average selling prices witnessed the fastest pace of increase since 1985, with a figure of +87, up from +77 in May. This follows consumer price inflation hitting a 40-year high of 10.1% in July. Retailers anticipate that prices will continue to rise at a similar rate in September.
Moreover, price pressures in the retail sector intensified in August, with average selling prices increasing at the quickest pace since 1985. Additionally, stock levels were considered too high in relation to expected demand, reaching the highest level since May 2020. Retailers expect stock positions to remain stable in the upcoming month.
Although the grocery sector experienced a positive boost in sales, other retailers, particularly those in the fashion industry, did not witness the same level of success. Despite the overall increase in retail sales, businesses remain cautious about the future, and inflation remains a concern. Given the uncertainties surrounding the pandemic and economic recovery, it is crucial for retailers to adapt and strategize to effectively navigate these challenges.
Useful links:
1. BBC: UK retail sales rise in August by more than expected
2. Financial Times: UK retail sales grow at fastest pace for nine months
