Retailers around the country have witnessed an increase in consumer demand in recent months, in part driven by improvements in the economy having a positive impact upon consumer confidence. This has led to rising sales and widening profit margins, giving credence to the belief that the economic situation is causing widespread recovery across British industries.
According to the latest figures released by the Office for National Statistics (ONS), retail sales climbed at a faster rate than originally forecast during September, increasing by 0.6 per cent on August’s slightly disappointing results and marking a five year high in the field of quarterly growth. Economists predicted a rise of only 0.4 per cent, making this news extremely positive in terms of growth.
In turn, this brought annual retail sales growth to 2.2 per cent, topping the 2.1 per cent expected by economists at the beginning of the month.
Retail expert Keith Richardson, of Lloyds Commercial Banking, believes that these results will further increase business confidence amongst retailers in the important weeks and months leading up to Christmas. While most chose to drop prices before Christmas last year, it now seems that the pre-recession tradition of the Boxing Day sales will hold true as retailers attempt to increase profits and widen margins.
He says; “The figures chart returning confidence amongst consumers and a renewed willingness to spend.
“After a more challenging August, these figures provide a boost ahead of the vital festive period, which most retailers expect to be the strongest in terms of sales since before the start of the financial crisis.
“In preparation for the run up to Christmas retailers are focusing on the breadth and quality of their ranges to support shoppers that are willing to spend but continue to be highly selective in their purchases.”
The recent housing boom has caused furniture sales to skyrocket, a trend which continued into September as consumers took advantage of promotional activity to make savings on big ticket items. However, for the second consecutive month, food sales proved to be less buoyant, falling short of growth and perhaps giving supermarket brands cause for concern.
While the statistics from the ONS are certainly positive, experts are now concerned that the growth exhibited over recent months may not be sustainable – sparking fears of a post-Christmas crash in sales.
As the 2.2 per cent rate of annual growth is now double the rate of wage growth, which remains stagnant at 1.1 per cent, economists have begun to question exactly how consumers can afford to continue spending in earnest. Many believe that consumers are increasingly relying upon purchasing on credit or borrowing money in order to fund larger spends, coining the phrase “Alice in Wongaland” to describe the phenomenon.
With the festive season fast approaching, retailers will be hoping that sales continue to grow in the coming months. However, while a very merry Christmas may be easily attainable, doubts remain whether this spate of good fortune will continue on into 2014.
Do you think consumers have become over-confident since the end of the recession, and will this come to an end abruptly at some point in the near future?
