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Non-essential spending under pressure
September 8, 2022
The anticipated downturn in consumer spending started last month with a 2% decline according to analysts, with more pressure on non-essential spending to come.
Latest figures from the British Retail Consortium-KMPG showed a 1% increase in spending for August but after the effects of inflation are counted in, sales volumes are declining.
Don Williams, retail partner at KPMG, commented: "As consumers return from summer holidays to an 80% increase in the energy price cap, double digital inflation and Christmas just three pay cheques away, the brakes could be firmly applied on non-essential spending for most UK households.
"The storm clouds are closing in as retailers brace themselves for a fall in demand – at a time when their own margins are under pressure from rising costs," he said.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The drop in the year-over-year growth rate of total sales in August is a bad result, giving that sales were falling from a year ago from their post-lockdown highs.
"After seasonally-adjusting and deflating the data, we judge that the BRC’s figures are consistent with around a 2% month-to-month drop in the official measure of the retail sales volumes in August. This drop makes sense, given the record low level of consumers’ confidence."
However, the Government's plans to hold down energy prices for consumers may help change the mood to some extent, at least for mid-market consumers.
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