Interest Rate Fears dampen June Retail Sales

Posted on 16 July, 2014 by Kirsten Kennedy

Retail sales have been steadily growing since the end of 2013 with uplift in consumer confidence together with a hike in real wages creating a more positive environment for retailers. However, the latest figures from the British Retail Consortium (BRC) and KPMG Retail Monitor show that this upward momentum somewhat faltered in June, with retail sales rising by only 0.6 per cent.

Interest-Rate-Fears-dampen-June-Retail-Sales

Excluding seasonal distortions, this is the slowest growth rate recorded since May 2011; a point at which the country was still struggling to battle the effects of the financial crisis. Furthermore, on a like for like basis, sales fell by 0.8 per cent year on year, furthering fears that consumer attitudes are cooling.

The trend of falling food sales continued into June, with the supermarket price war encouraging consumers to shop around for the best prices. Unfortunately, this was coupled with a worrying plunge in home ware sales – this was especially disappointing given the strong performance this category has enjoyed recently.

KPMG head of retail David McCorquodale believes that part of this decline in sales may be due to comments by Bank of England Governor Mark Carney, in which he hinted that interest rates may rise by the end of the year.

He said; “June saw the brakes applied to spending as shoppers put purchases of big ticket items on hold whilst they waited to see if the Bank of England would take action on interest rates.

“Even sales of home accessories and furniture flat lined, which is surprising given the UK is reportedly in the midst of a housing boom.”

Mr McCorquodale also pointed out that retailers may struggle to achieve the excellent results of last year, when a number of factors encouraged a boom in spending. This, he claims, could be painting June’s results in a bad light.

This claim is backed up by the fact that, on a monthly basis, retail sales grew by 2.6 per cent between May and June, with non-food rising 4.7 per cent and food sales growing by 0.1 per cent.

Clothing sales played a large part in the success of the non-food sector, with retailers finally seeing consumers begin to spend in earnest on items such as footwear and summer collections. This allowed BRC director general Helen Dickinson to remain optimistic that recovery within the retail industry will continue to build in momentum.

She said; “The recovery is still on track, however we are detecting differences in attitudes from customers, perhaps led by the competitive environment for food prices.

“Consumers are delighted to be saving on their food bills, but are prepared to spend a little bit more on discretionary items.”




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