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Retailers see lift in June spending

© The Herald
Originally published: 15.07.2008
by Mark Williamson


British consumers continued to increase spending in June when the Euro 2008 televised football tournament helped grocers prosper despite gathering fears about the outlook for retailers.

However, growth in sales slowed sharply and stores in many sectors had to work harder to get shoppers to spend as rising inflation and a slowdown in the housing market dampened sentiment.

In what may provide a fresh sign of a surprising resilience on the part of consumers, the latest sales monitor from the British Retail Consortium and KPMG, published today, shows that total retail sales increased by 2.1per cent in June compared with the same month last year.

Total sales have shown continued year-on-year growth in all six months of the year to date.

Given sharp rises in the costs of basic goods such as bread, the latest growth may have been driven by rising prices. The data are not adjusted for price changes.

Nonetheless, experts said the food and drink sector enjoyed significant growth in a phenomenon which indicated consumers were still ready to spend on enjoying a good time.

"Collectively UK grocery stores are performing robustly, " said Joanne Denney-Finch, chief executive of sector champion IGD.

"Sales in June benefited from drier weather, midsummer seasonal events such as Euro 2008, festivals and outdoor eating."

However, Stephen Robertson, director general of the British Retail Consortium, noted food and drink sales growth may have been flattered by the fact spending last June was depressed by miserable weather in that month.

Growth in total sales was well down on the punchy rate of 4.6per cent recorded in May.

Robertson said: "Almost all other retail sectors recorded falls with electricals, DIY and homewares the worst hit and furniture sales falling faster than for three years."

In line with the BRC's policy, Robertson highlighted the fact that stripping out the effect of increases in floor space, like for like sales fell by 0.4per cent in May, compared with the same month last year.

The sectoral breakdown shows that firms in areas like furniture retailing and DIY suffered from the apparent reluctance of consumers to commit to big ticket items.

Robertson claimed retailers were doing all they could to reassure customers, by offering "some of the strongest discounts and promotions in decades and keeping a lid on inflation". He said the government could help the sector by avoiding tax hikes and increases in regulation.

The revelation that spending rose despite inflationary pressures may strengthen the hand of hawks at the Bank of England, which held interest rates at 5per cent last week.

The latest Scottish Retail Consortium's monitor for Scotland, published last month, showed growth continuing on a markedly stronger trend north of the border than in other parts of the UK.

 
 

 
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