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Retail sales lifted by housing market gains

© The Herald
Originally published: 19.08.2009

Retail sales grew strongly in Scotland in July, when the tentative recovery in the housing market encouraged consumers to spend on goods for their homes for which demand has long been weak, although the rate of growth slowed.

The Scottish Retail Consortium reported that total sales grew by 4.8per cent annually in July, when some retailers in sectors that have struggled in the recession found that life appeared to be getting easier.

Prepared by the consortium and accountancy giant KPMG, the latest report is notable for the fact that it provides evidence that the improvement in the housing market in recent weeks has started to translate into increased demand for things like carpets. These have been under pressure for months.

Sales of big ticket items like electrical goods remain poor. However, the fact that more people are deciding they can afford to buy less costly household items may be evidence of a notable shift in consumer thinking in Scotland.

The July monitor indicates that confidence remained much higher in Scotland than other parts of the UK in July. The housing market has remained stronger in Scotland than south of the border.

The latest increase in Scotland was 0.1 percentage points higher than the monthly average growth rate of 4.7per cent recorded in the last 12 months.

Across the UK total retail sales rose by 3.6per cent annually in July. The annual growth rate has averaged just 1.5per cent monthly over the last year.

However, the annual growth rate in Scotland was appreciably lower that the 6.6per cent increase recorded in June, when there was much more sunshine than in July. The report's findings suggest that sentiment remains very sensitive to factors like weather.

Continuing the trend seen over the past year, food sales grew much faster than nonfood sales (8per cent annually against 1.9per cent).

Richard Dodd of the Scottish Retail Consortium- said: "Generally, dreary weather left many thinking they didn't need more summer fashion or outdoor goods on top of what they'd already bought in previous months. But it wasn't cold or wet enough to get people buying winter things.

"While the amount spent on food rose, growth was the slowest since April 2008, as food inflation fell and interest in summer food waned."

"At all levels, volatility remains high, reflecting the precarious nature of consumer demand, " said David McCorquodale, head of retail in Scotland for KPMG.

Stripping out the effect of store openings, like for like sales grew by 0.6per cent in Scotland, versus 1.8per cent for the UK.

This may mean that some retailers are having a tougher time in Scotland than elsewhere in the UK. Alternatively, the apparent anomaly may have been caused by the fact that some retailers have increased their presence in Scotland in order to cash in on the fact that demand was stronger north of the border.

Following a dramatic rise in unemployment over the past year, some people may have reservations about the findings of the monitor.

Official figures howed that the output of retailers increased by 2per cent in constant prices in Scotland in the first quarter, compared with the preceding three months, and by 3.5per cent annually.

The Scottish Retail Consortium found the annual growth rate of sales averaged 3.9per cent in the first three months.


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