Figures from the British Retail Consortium (BRC) revealed a 2.3% rise in sales last month compared to a 6.4% rise in the previous year. The latest BRC-KPMG sales monitor found that the increase in sales was largely driven by inflation, which is more than 9%, and masked a larger fall in the number of items sold. Helen Dickinson, chief executive of the BRC said the summer had been “an incredibly difficult time for trading”. “Consumer confidence remains weak and rising interest rates combined with talk of a recession will not improve the situation,” he said. “The Bank of England now expects inflation to top 13% in October when energy bills rise again, further tightening the screws on struggling households. This means both consumers and retailers face a rocky road for the rest of 2022.” Some experts expect rising inflation to lead to a recession that could last into next year and hit millions of the most vulnerable households, especially in the worst-hit areas of the country. The Bank of England predicted last week that inflation could top 13% by the end of the year – the highest since 1980 – plunging Britain into recession. Spending on clothing and other non-essentials has picked up so far this year, as warm weather and the chance to enjoy long-delayed overseas holidays and big family events, especially weddings, has been supported by savings made by many during the pandemic lockdown . However, Paul Martin, head of UK retail at consultancy KPMG, said: “Summer could be the calm before the storm with conditions getting tougher as consumers return from their summer holidays to their credit accounts holiday cards, another energy price hike and interest rate hikes. With a stronger cost of living headwind on the horizon, consumers will need to prioritize essentials and discretionary product spending will come under pressure. “Consumers are determined to enjoy a belated vacation and a summer without restrictions. The subdued demand, especially for new clothing, has so far been at significant enough levels to keep the overall retail sector relatively healthy.” The trend for continued spending was reflected by users of Barclaycard, one of the UK’s largest debit and credit card operators, which recorded an increase in consumer spending on electronics (8.6%), clothing (4%) and pharmacies, health and beauty (3.1 %) in July compared to June. Subscribe to First Edition, our free daily newsletter – every morning at 7am. BST Hospitality and international travel fell month-on-month, in one of the first signs that families are cutting back on social plans amid the higher cost of living. However, spending in both of these categories was more than double last year. Barclaycard said spending on essentials rose 7% in July compared with a year earlier, up from a 4% rise in June, driven by fuel and supermarket purchases. Its card users spent 29.9% more on petrol and other fuels while utility bills rose by 43.9%. The strain on consumer finances caused by these higher bills is expected to pile further pressure on hospitality businesses, including restaurants and pubs, and others dealing in non-core items. Shoppers are already turning to discount stores, abandoning brands in favor of supermarket own-label products and cutting back on spending on luxuries such as subscription services and gaming, according to data from the Nationwide Building Association.
