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UK August retail sales record unexpected 0.9% fall as shortages bite

By Frank Prenesti

Date: Wednesday 29 Jun 2022

(Sharecast News) - UK retail sales volumes fell 0.9% in August from July and unchanged year on year, the Office for National Statistics said on Friday, as grocery sales were hit by more people returning to restaurants and pubs.
Analysts had forecast a 0.5% rise from July and year-on-year growth of 2.7%. Retail sales had risen 2.4% annually in July. However, August retail sales were 4.6% above pre-virus levels.

Food store sales volumes fell by 1.2% with some evidence to suggest that the further easing of Covid-19 hospitality restrictions had an impact on sales as people increased their social spending such as eating and drinking at restaurants and bars, the ONS said.

Non-food stores reported a fall of 1.0% in sales volumes, driven by falls in department stores (-3.7%) and other stores, such as sports equipment and computer stores (negative -1.2%).

Automotive fuel sales volumes rose by 1.5% as more people used their cars, however, they remained 1.2% below their pre-pandemic February 2020 levels.

The ONS also highlighted that in the two weeks to August 22, around 6.5% of retailers said they were unable to get the materials, goods or services they needed due to ongoing supply chain challenges.

Department stores highlighted the biggest difficulties, with 18.2% of these companies stressing issues, while 22% of food stores said they were able to source products they needed but had to change suppliers or find alternative solutions.

"August's retail sales data bring more evidence that the recovery in consumers' spending has lost considerable momentum in Q3 and should cause markets to doubt whether the (Bank of England's) Monetary Policy Committee really will be in a position to hike Bank Rate as soon as February," said Pantheon Macroeconomics chief economist Samuel Tombs.

He added that retail sales could come under further pressure because households' disposable income would decline in the coming months as inflation soars and the government cuts universal credit benefits, closes the furlough scheme, and raises tax on national insurance.

"Accordingly, we continue to think that households' spending will take until the third quarter of 2022 to return to its pre-Covid peak," he said.

AJ Bell analyst Danni Hewson said stock shortages presented retailers with a real challenge as the Christmas sales period approached.

"Christmas 2020 was a huge disappointment for many families and for many retailers and as long as restrictions don't resurface, this festive season could be a record breaker. Pent up demand and a savings cushion for at least some families will result in a willingness to pay a little more for the goods they want wrapped under the tree and spread groaning on the table," she said.

"But retailers know there's a sweet spot and whilst they'll be anxious to make up for lost sales, they'll also find they've little opportunity to discount goods because the wiggle room has thinned."


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