Retail monitor
Monday, 17 Sep 2007 00:01
Clothes shops did not enjoy a summer of love
We take a look at the most recent retail indicators to let you know the current state of Britain's high streets.
The rain may have stopped, interest rates may have stayed the same and a new Harry Potter book may have been on the shelves, but it was still an August to forget for retailers.
For despite the end of the unseasonable flooding and the return of infrequent patches of sunshine, retail sales failed to capture the imagination in the final month of a paradoxical summer.
Matters were made even more discouraging on the back of August 2006's bumper retail figures amid a summer-clothes and cold-drink friendly heatwave.
As mentioned though, there is some comfort for retailers in the shape of the Bank of England, which has held interest rates at 5.75 per cent for the last two consecutive months.
And with inflationary fears seemingly soothed, there may be enough of 2007 remaining for retailers to bounce back in.
The British Retail Consortium (BRC) and Confederation of British Industry (CBI) offer their take on the retail situation in June while developments up to May are noted by the Office for National Statistics (ONS) and the London Retail Consortium (LRC). GfK NOP and Nationwide's assessments of consumer confidence are also included.
BRC/KPMG retail sales index
August: UK retail sales up 1.8 per cent on like-for-like basis. Increase dwarfed by 2.5 per cent growth experienced in August 2006.
Kevin Hawkins, director general of the BRC, commented: "The arrival of drier, if not warmer, weather has had little effect on retail sales.
"The squeeze on disposable incomes, reinforced by worries about interest rates, is depressing both retail sales and shop prices. There is no case for another hike in interest rates. The next move should be in the opposite direction."
CBI retail survey
August: 42 per cent of retailers say year-on-year sales are up, 26 per cent say they are down. Overall balance of 15 per cent in line with expectations but still worst barometer reading since November 2006.
Ian McCafferty, chief economic adviser at the CBI, said that figures would have been even more dispiriting for retailers were it not for the release of the final book in JK Rowling's phenomenally successfully literary series, Harry Potter and the Deathly Hallows.
"The strong high street spending that retailers enjoyed over the spring has passed, and they have experienced a steadier rate of sales over the past quarter," he explained.
"This more moderate growth is expected to continue, and retailers are less inclined to put up prices, which should help alleviate pressure to move interest rates up again.
"The Harry Potter effect seems to have helped lift sales for booksellers, but the damp and disappointing summer has not done clothes shops any favours."
Nationwide consumer confidence index
August: Overall index falls back two points to 94 following one-point rise in July. All four individual indices fall in same month for first time this year.
Nationwide chief economist Fionnuala Earley explained that the downbeat index reading reflected five interest rate rises felt over the last year.
"It now seems clears that consumers are taking this to heart in their spending intentions," she said.
"Recent events such as the floods and the turmoil in the financial markets may also be having something of an impact on their sentiment."
GfK NOP consumer confidence index
August: Monthly index rises two points to minus four. Consumers revel in newfound optimism for major purchases, while savings index remains high.
"Consumers this month have a renewed confidence in the major purchase index with an increase of six points," commented Rachael Joy of GFK NOP's consumer confidence team.
"This August they also appear happier about the economy in general compared to this time last year, which could be a reflection of lower inflation rates, a buoyant housing market and good savings rates being offered."
But Ms Joy also sounded a note of caution, warning: "Next month it will be interesting to see if consumers continue with this upbeat attitude, or if the threat of more interest rate increases, more rain and an unstable US market begin to take their toll?"
LRC/KPMG London shop price index
August: Sales up 9.8 per cent compared to previous August. Yearly growth compares with 22 per cent rise recorded in August 2006 as capital recovered from July 2005 bombings.
Helen Dickinson, head of retail at KPMG, admitted that despite the improved weather in August "it was always going to be a challenge" to emulate growth experienced in June and July.
"However, 9.8 per cent like-for-like growth for the month is a highly creditable performance and re-emphasises how London continues to outperform the rest of the UK as a whole," she added.
"There remains significant variation in performance of individual retailers."
ONS retail sales
July: Sales rose by 0.7 per cent between June and July. Sales volumes in three months to July up 1.1 per cent on previous quarter.
"Increases were reported in all sectors except for non-specialised stores, where sales volume fell by 0.3 per cent and textile, clothing and footwear stores, where sales fell by 0.5 per cent," an ONS spokesperson said.
"The largest increase occurred in household goods stores, where sales volume grew by 3.7 per cent."