Retail sales disappointment in August, another deterrent increase for banks in 2022, economist says



Image © Adobe Images

UK retail sales fell 0.9% in August month-over-month, a slight improvement from July’s -2.8% figure, but belies consumer expectations. analysts for 0.5% growth to report.

That means sales were flat through August, down from the 1.9% growth recorded in July and below consensus expectations for 2.7% growth.

The figures are the latest to confirm that the UK economic rebound has slowed sharply over the summer months,

“August’s retail sales data provides further evidence that the recovery in consumer spending has lost considerable momentum,” said Samuel Tombs, UK chief economist, Pantheon Macroeconomics.

ONS Retail Sales

Image source: Office for National Statistics – Monthly Business Survey – Retail Sales Survey

Data shows that a major drag on the downside came from food store sales volumes, which fell 1.2% in August.

The ONS says there is evidence to suggest that the further easing of hospitality restrictions has had an impact on sales, as people have increased social spending, like eating and drinking in restaurants and bars.

This is corroborated by data from Open Table, which showed an upturn in online restaurant reservations in August.

Retail Food Stores

Image source: Office for National Statistics – Monthly Business Survey – Retail Sales Survey

This change is not necessarily a drag on broader economic growth, as the loss suffered by grocery retailers benefits other businesses.

“This is probably not as gloomy a sign for the overall economic recovery as it sounds, as at least some of it reflects their spending shifting elsewhere after the closures,” Dales said.

However, continued supply-side pressures could also be driving the data, as global and domestic supply chains remain constrained by a plethora of post-pandemic issues.

The ONS reports that in the past two weeks, 6.5% of businesses in the retail sector have been unable to obtain the materials, goods or services they need.

“Pent-up demand and foreclosure economies may have sustained growth this summer, but this latest set of numbers indicates that supply chain issues and weakening consumer demand are starting to be felt,” said Aled Patchett, Retail and Consumer Goods Manager at Lloyds Bank.

Patchett says these trade headwinds will only intensify as fall approaches, as product limitations may constrain sales volumes during the critical gold quarter.

“Many large retailers have already issued warnings about their ability to put the right products on the shelves, while the UK’s Covid-fueled appetite for online fulfillment will be tested heading into Christmas if the problems Current driver recruitment is unresolved, “Patchett says.

In addition, data shows Main Street was unable to recover lost volumes caused by the pandemic, with the proportion of online retail sales rising to 27.7% in August 2021.

This figure is up from 27.1% in July and is significantly higher than the 19.7% of February 2020 before the pandemic.

Regarding the outlook, Samuel Tombs of the Pantheon said retail sales contribute to his opinion that the Bank of England will not raise interest rates in the first half of 2022, which is currently awaiting market consensus. .

“The short-term outlook for household spending is blurry,” said Tombs, who has been ranked by Refinitiv as the most accurate forecaster of the UK economy in 2020.

The drop “should fuel doubts over when the MPC will raise interest rates,” he adds.

Tombs indicates that real household disposable income will decline in the fourth quarter as CPI inflation climbs to around 4.0%, labor incomes fall following the closure of the holiday scheme and the increase in £ 20 per week universal credit is waived.

The recently announced government tax hikes for the national insurance contribution are also expected to weigh on disposable income, while the prevalence of Covid-19 should allow households to remain cautious.

Pantheon Macroeconomics expects household spending to take until the third quarter of 2022 to return to its pre-Covid peak.



Leave A Reply