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 sales growth, footfall and inflation.
Retail Sales Monitor: Sales beat expectations despite falling volumes
Headline Statistics:
- UK Total retail sales increased by 5.2% in February, against an increase of 6.7% in February 2022. This is below the 3-month average growth of 5.5% and above the 12-month average growth of 2.4%.
- UK Like-for-like retail sales increased 4.9% in February, against an increase of 2.7% in February 2022. This was below the 3-month average growth of 5.2% and above the 12-month average growth of 1.6%.
- Food sales increased 8.3% on a Total basis and 8.2% on a Like-for-like basis over the three months to February. This is above the 12-month Total average growth of 4.3%. For the month of February, Food was in growth year-on-year.
- Non-Food sales increased 3.2% on a Total basis and 2.7% on a like-for-like basis over the three-months to February. This is above the 12-month Total average growth of 0.8%. For the month of February, Non-Food was in growth year-on-year.
- Over the three months to February, Instore Non-Food sales increased 8.1% on a Total basis and 7.3% on a Like-for-like basis since February 2022. This is below the 12-month average growth of 10.8%.
- Online Non-Food sales decreased by 3.1% in February, against a decline of 28.4% in February 2022. This is above the 3-month average decline of 3.2% and above the 12-month decline of 7.7%.
- The proportion of Non-Food items bought online (penetration rate) decreased to 38.5% in February from 40.3% in February 2022.
Commentary:
Helen Dickinson OBE, BRC Chief Executive, said:
“Retail sales held up better than expected this February, though volumes remained down on last year. While the cost-of-living crisis has made customers increasingly price sensitive, they are still ready to celebrate special occasions. This helped deliver strong sales of fragrance and jewellery for Valentine’s Day. Energy-saving appliances also continued to sell well, but the rush for warm coats and boots subsided as the January sales splurge satisfied customer appetite.”
“The economic backdrop means retailers face volatile trading conditions. Many consumers will be concerned as they prepare for further energy price and tax rises in April. To protect people from ongoing price rises for goods, Government must avoid additional regulatory costs on business that compromise retailers’ ability to invest in lowering prices and in other areas that would contribute to the UK’s economic recovery.”
Economic Briefing Report: Inflation to stick higher
Key Data:
- GDP fell by 0.5% in December, following growth of 0.1% in November. Services activity fell, with strikes driving a decline in healthcare. Consumer-facing services fell also as the lack of domestic football reduced sports and associated activities. There were also negative contributions provided by retail trade, as sales volumes continue to fall.
- Inflation is easing from winter highs as the Consumer Price Index fell from 10.5% to 10.1%, now having peaked as projected by the Bank of England. Of the headline rate, 4.1% emanates from housing, energy and transport costs.
- The BRC-KPMG measure of retail sales slowed to 4.2% in January, a significant slowdown from the 6.9% growth seen in the preceding month.
- The UK economic inactivity rate was estimated at 21.4%, 0.1 percentage points lower than the previous quarter, and 1.2 percentage points higher than before the coronavirus pandemic.
Commentary:
“The outlook for the UK’s economy is improving slightly against a challenging backdrop. A recession is still expected this year and through 2024, but the drop in output is far shallower than initially anticipated by the Bank of England as the energy price shock to household incomes in Q2 2023 lessens.
However, household demand will remain under pressure from relatively high energy bills, food prices and housing costs. The Bank of England expects inflation to retreat from double-digit highs to 3.9% by December 2023. However, the BRC-Nielsen Shop Price Index (SPI) shows that inflation is persisting, with further increases in prices seen month-on-month. So while the annual rate of inflation will fall, we expect it to fall at a slower rate than that expected by the Bank of England.
Business activity (as measured by the Purchasing Managers’ Index) registered a surprise bounce last month as consumer confidence improved from its (all-time) lows. Supply shortages also lessened, boosting factory output. These factors suggest more resilience in the economy. However, the trading environment is still one of high input costs, and higher interest rates, which is squeezing business and household balance sheets. As a result, tough conditions ahead remain, at least until summer, with resultant insolvencies across many sectors expected throughout the year and a rise in unemployment to come.”
– Harvir Dhillon, Economist
Footfall growth slows as high streets and shopping centres outperform retail parks
Key findings include:
- Total UK footfall increased by 10.4% in February (YoY), 2.1 percentage points worse than January and worse than the 3-month average increase of 12.8%.
- High Street footfall increased by 17.8% in February (YoY), 2.4 percentage points worse than last month’s rate and worse than the 3-month average rise of 18.4%.
- Retail Parks saw footfall decrease by 3.3% in February (YoY), 0.2 percentage points better than last month’s rate but the same as the 3-month average decline of 3.3%.
- Shopping Centre footfall increased by 11.7% in February (YoY), 0.7 percentage points worse than last month’s rate but marginally better than the 3-month average rise of 11.3%.
Commentary:
Helen Dickinson OBE, BRC Chief Executive, said:
“Growth in footfall slowed this month after the rush of Christmas shopping and January sales. Some people are making fewer visits as the cost of living continues to bear down ahead of the April energy price rise. Despite this, high streets continue to show the biggest improvement compared to last year, when concerns around Covid kept people away from town and city centres. Footfall at retail parks suffered as customers switched back to shopping centres and high streets, which are being buoyed by returns of the office commute.
“Consumer demand remains fragile, owing to the ongoing cost of living crisis and weak consumer confidence. Many retailers are investing in their store experience, and all continue to support customers with the cost of living. But it is vital that Government does not burden the retail industry with additional regulatory costs that hinder investment.”
High costs burden retailers and consumers
Summary:
- Shop Price annual inflation accelerated to 8.4% in February, up from 8.0% in January. This is above the 3-month average rate of 7.8%. This brings shop price growth to a fresh high.
- Non-Food inflation accelerated to 5.3% in February, up from 5.1% in January. This is above the 3-month average rate of 4.9%. Inflation rose to a fresh high in this category.
- Food inflation accelerated to 14.5% in February, up from 13.8% in January. This is above the 3-month average rate of 13.8% and is the highest inflation rate in the food category on record.
- Fresh Food inflation accelerated in February, to 16.3%, up from 15.7% in January. This is above the 3-month average rate of 15.6% and is the highest inflation rate in the fresh food category on record.
- Ambient Food inflation accelerated to 12.2% in February, up from 11.3% in January. This is above the 3-month average rate of 11.5% and is the fastest rate of increase in the ambient food category on record.
Commentary:
Helen Dickinson OBE, Chief Executive, British Retail Consortium, said:
“Retail prices rose in January as discounting slowed and retailers continued to face high input costs. Ambient food inflation accelerated the most as wholesale and bulk prices grew, particularly for sugar and alcohol. Fresh food prices also remained high due to increased food production costs as well as elevated wholesale fruit and vegetable prices. Meanwhile, clothing and footwear prices eased, so customers were able to replenish their wardrobes with some bargains during the January sales.”
“With global food costs coming down from their 2022 high and the cost of oil falling, we expect to see some inflationary pressures easing. However, as retailers still face ongoing headwinds from rising energy bills and labour shortages, prices are yet to peak and will likely remain high in the near term as a result.”
MIA Members can get in touch to see any of these reports in full.
