The MIA’s Membership with the British Retail Consortium gives us access to an expanded portfolio of unbiased research and analysis to share with our members. Today, we’re providing key macroeconomic data from the UK economy, including inflation figures, footfall levels, sales growth and GDP.
Inflation broadens
Headline Statistics:
- Shop Price annual inflation accelerated to 5.7% in September, up from 5.1% in August. This is above the 3-month average rate of 5.1%. This marks another record for shop price inflation since this index started in 2005.
- Food inflation accelerated strongly to 10.6% in September, up from 9.3% in August. This is above the 3-month average rate of 9.1%. This is the highest inflation rate in the food category on record.
- Non-Food inflation accelerated to 3.3% in September, down from 2.9% in August. This is above the 3-month average rate of 3.1%. Inflation remains rose to a fresh series’ high in this category.
- Fresh Food inflation strongly accelerated in September to 12.1%, up from 10.5% in August. This is above the 3-month average rate of 10.4%. This is the highest inflation rate in the fresh food category on record.
- Ambient Food inflation accelerated to 8.6% in September, up from 7.8% in August. This is above the 3-month average rate of 7.4%. This is the fastest rate of increase in the ambient food category on record.
Commentary:
Mike Watkins, Head of Retailer and Business Insight, NielsenIQ:
“With food and household energy prices continuing to rise, it’s no surprise that NielsenIQ data shows that 76% of consumers are saying they expect to be moderately or severely affected by the cost-of-living crisis over the next 3 months, up from 57% in the summer. So households will be looking for savings to help manage their personal finances this autumn and we expect shoppers to become more cautious about discretionary spend, adding to pressure in the retail sector.”
Footfall making strides
Headline Statistics:
- Total UK footfall decreased by 9.8% in September (Yo3Y), a 2.6 percentage point improvement from August. This is better than the 3-month average decline of 11.4%.
- Footfall on High Streets declined by 11.9% in September (Yo3Y), 1.7 percentage points better than last month’s rate and an improvement on the 3-month average decline of 13.0%.
- Retail Parks saw footfall decrease by 2.5% (Yo3Y), 1.6 percentage points better than last month’s rate and an improvement on the 3-month average decline of 9.3%.
- Shopping Centre footfall declined by 22.7% (Yo3Y), the same as last month’s rate and above the 3-month average decline of 23.0%
Commentary:
Helen Dickinson OBE | Chief Executive | British Retail Consortium:
“Footfall reached its highest level since the onset of the pandemic, coming within 10% of its pre-pandemic levels. High Streets and Retail Parks saw an improvement in shopper numbers, while Shopping Centres continued to lag significantly behind, still more than a fifth down from three years ago. Shopping Centres continue to see higher vacancy rates than other locations, with many not have recovered from the loss of key anchor stores such as Debenhams, which went into liquidation during the pandemic.
These figures belie the collapse in consumer confidence which has resulted in falling sales volumes throughout the year. Meanwhile, soaring cost inflation is leading to upwards pressure on prices. The recent mini budget failed to provide retailers with clarity on the future of business rates, already a massive cost. Without action, retailers could face a 10% rise in their rates bill – equal to an additional £800m across the industry. While the energy support for businesses has been warmly welcomed by companies, a freeze to business rates, with the promise of further reform, would go a long way to restoring business confidence and supporting future investment, as well as offering retailers a means to cut prices for their customers.”
Sales growth picks up as Autumn approaches
Headline Statistics:
- On a Total basis, sales increased by 2.2% in September, against an increase of 0.6% in September 2021. This is above the 3-month average of 1.9% and below the 12-month average growth of 2.7%.
- UK retail sales increased 1.8% on a Like-for-like basis from September 2021, when they had decreased by 0.6%. This was above the 3-month average growth of 1.3% and the 12-month average growth of 0.9%.
- Over the three months to September, Food sales increased 4.6% on a Total basis and 4.2% on a Like-for-like basis. This is above the 12-month Total average growth of 1.1%. For the month of September, Food was in growth year-on-year.
- Over the three-months to September, Non-Food retail sales decreased by 0.4% on a Total basis and 1.1% on a like-for-like basis. This is below the 12-month Total average growth of 4.0%. For the month of September, Non-Food was in growth year-on-year.
- Over the three months to September, In-Store sales of Non-Food items increased 2.2% on a Total basis and 1.1% on a Like-for-like basis since September 2021. This is below the 12-month growth of 33.3%.
- Online Non-Food sales decreased by 2.6% in September, against a decline of 7.3% in September 2021. This is above the 3-month average decline of 4.1% and the 12-month decline of 13.8%.
- The Non-Food Online penetration rate decreased to 38.4% in September from 40.5% at the same point last year.
Commentary:
Paul Martin, UK Head of Retail, KPMG:
“Retail sales remained positive in September with growth of more than 2% on the same period last year – but much of this will be attributed to increased prices as volume of sales continue to be challenging
Once again, clothing and footwear came to the rescue of the high street, and back to school purchasing was a driver in retail growth figures, with sales of children’s shoes up over 15%. Sales of household appliances and cooking accessories also moved into positive territory this month, as consumers look to purchase more energy efficient kitchen items in light of rising energy prices. Online sales remain down year on year, and those categories that did see some growth remained in single figures.
With interest rates, inflation, labour, energy and costs of goods continuing to climb, retailers are heading into one of the most challenging Christmas shopping periods they have had to deal with in years. Consumer confidence remains low, and retailers are having to tread a very fine line between protecting their own margins and further denting confidence by passing on price rises. A laser focus on their own costs and efficiencies in order to remain price competitive this festive season will be essential. As consumers focus on getting value for money through switching to own brand items and seeking out discounts, getting pricing and promotional activity right could be the difference between a successful or dismal Christmas for retailers this year.”
UK set for deeper recession
Headline Statistics:
- GDP rose slightly by 0.2% in July, following a 0.6% fall in June. Services were the main contributor to the rise in the most recent reporting period, as information and communication grew strongly, in addition to rises in GP appointments raising human health and social work output. Output in consumer-facing, activities, however, grew slightly due to strong retail sales off the back of the Women’s Euro Championship and Commonwealth Games.
- Inflation remains at its highest since April 1983 with the Consumer Price Index easing (though remaining high) to 9.9%, which is around 1% below where the Bank of England see it peaking in 2022 Q4.
- In August, BRC-KPMG’s retail sales grew by 1.0% year-on-year, following July’s expansion in sales of 2.3%.
- The UK’s economic inactivity rate was estimated at 21.7%, 0.4 percentage points higher than the previous quarter, and 1.5 percentage points higher than before the coronavirus pandemic.
Commentary:
Harvir Dhillon – Economist:
“The UK is still expected to enter a recession, despite the government announcement of an immense fiscal stimulus package comprising tax cuts in addition to potentially £150 billion in support for households, capping average energy bills at £2,500.
The Bank of England was forced to act with open market operations to maintain financial stability, buying £65 billion in government bonds to stem the risk of insolvency in pension funds.
Inflation did ease to 9.9% in August and is forecast to peak at just under 11% in Q4 2022, however, the risk is rising that the UK will begin to import more inflation due to a weakening pound. Against a backdrop of heightening shop prices and increased mortgage payments ahead into 2023, the outlook for demand is weak in the near to medium term.”
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