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Spending this Christmas predicted to dip

Research compiled by HIS Market for Visa has predicted a dip in Christmas spend – the first time in five years – on household goods, clothing and trips away by 0.1 per cent, with the High Street expected to drop for a third consecutive year by 2.1 per cent.

On a brighter note, online sales are predicted to be strong, rising to 3.6 per cent and predicted to be 40p in every pound spent during the seasonal period.

“Looking back, consumers were in a sweet spot in 2016 – low inflation and rising wages meant there was a little extra in household budgets to spend on the festive period,” said Visa’s chief commercial officer Mark Antipof.

“This year has seen a reversal of fortunes – with inflation outpacing wage growth and the recent interest rate rise leaving shoppers with less money in their pockets.

“Although overall sales are likely to disappoint, we expect some clear winners to emerge. Online and mobile are set to take a record share of Christmas spending.

“Hotels, restaurants and bars are also forecast to report strong growth as Britons choose to celebrate Christmas and New Year closer to home.”

Scottish retail figures on the up after disappointing summer

Figures released by the Scottish Retail Consortium (SRC) found that retail sales improved through Scotland in August after a tough summer.

Total sales grew by 1.3% in August after deflation adjustment, which was up on the three and 12 month averages. Food sales boosted total sales with an increase of 4.1%, compared to a decrease of 0.3% in August 2016.

There was a decline of 1.5% of total non-food sales through August; however this was offset when compared to a decrease of 3.7% in August 2016.

Speaking about the figures, Ewan MacDonald-Russell, head of policy and external affairs for SRC said that the figures were good news “on the surface,” but warned that the year-on-year food sales was driven in part by food inflation of 1.3%.

“Retailers will welcome these figures after a pretty disappointing summer,” added Russell.

“However, the underlying challenges facing the industry, not least the continued pressure on household incomes and fragile consumer confidence, mean Government should be very careful about any policies which could lead to increases to the cost of living.”

Craig Cavin, head of retail in Scotland for KPMG, commented: “Grocery sales lead the charge once again, with a 4.1% year on year increase bringing the 12-month average to its highest level for more than three years.

“With August bringing children’s return to school, the Edinburgh Festival and the release of autumn clothing ranges, non-food’s recent poor performance received a late summer boost, with online sales nudging the category into growth.”

Inflation remains flat, Retail Price Index rises in July

The latest figures from the Office of National Statistics (ONS) have revealed that inflation remained flat in July, at 2.6%, with experts hoping that that it has now “peaked.”

Figures also show that the Consumer Price Index remains above the Bank of England’s 2% target, considerably better than analyst’s predictions of a 2.7% rise.

However, the Retail Prove Index rose by 3.4%, resulting in an ongoing squeeze on an average household spend.

ONS figures also found that food and clothing prices were the worst effected.

Commenting on the figures, Ben Brettel, senior economist, Hargreaves Lansdown said: “It now looks quite possible inflation has peaked, and will fall back further in coming months.

“The year-on-year increase in producers’ raw material costs fell to 6.5 per cent in July – undershooting forecasts for a seven per cent rise.

“This was down from 10 per cent in June, the biggest month-to-month slowdown in almost five years.

“Input prices are a leading indicator for consumer price inflation as higher input prices are often ultimately passed on to the consumer, and therefore a lower number here could bode well for softer consumer prices down the line.

“All this is good news for the consumer, as it helps alleviate the continuing squeeze on household finances, though pay is still shrinking in real terms for now.”

Rising inflation troubles retail

A survey by London-based information and analysis company IHS Markit has found that the firm’s index measuring sentiment of UK households’ personal finances dropped from 47.1 to 45.8 between May and June, marking one of the lowest readings since 2013 and the lowest for three months.
“June’s survey reveals that UK household finances remain under intense pressure from rising living costs,” said IHS Markit senior economist Tim Moore.
“While the squeeze moderated slightly since last month, worries about the outlook have deepened.”
58% or respondents also expected interest rates to rise over the next 12 months, more than double the figure post Brexit referendum.
As the pound dropped further following the General Election, the Bank of England (BoE) kept rates to 0.25% in a bid to steady the financial ship. However, three of the right members of the Monetary Policy Committee voted for an increase, with widespread speculation of an imminent hike in rates.
This, along with inflation hitting a four-year high and outpacing BoE predictions, has caused concern within retail.
“Core inflation, which excludes food and energy, also unexpectedly picked up in May, reaching 2.6 per cent, the fastest since November 2012,” commented eCommera’s head of insight Alex Hamilton.
“The concern for retailers is that weak consumer confidence, amid political uncertainty and falling real wages, will make shoppers more price conscious, at a time when many brands are looking to pass on cost rises to their customers in a bid to protect margins.”

Petrol Station

Rise in fuel prices hits UK retail

The Office for National Statistics (ONS) has revealed that UK Retail sales increased by 3.7% in February 2017 compared with the same period 12 months earlier and increased by 1.4% compared with January 2017 across all store types.

However, the underlying pattern suggested by the three-month on three-month movement decreased by 1.4% for the second month in a row, which is the largest decrease since March 2010 and only the second fall in December.

“February’s retail sales figures show fairly strong growth, though the underlying three-month picture shows falling sales as February’s figures follow two consecutive months of decline in December and January,” said ONS statistician Kate Davies.

 “The underlying trend suggests that rising petrol prices in particular have had a negative effect on the overall quantity of goods bought over the last three months.”

The ONS reports an average of £1.20p forecourt price for a litre of petrol in February, with diesel 3p more.

The rise in fuel and food costs pushed inflation beyond the Bank of England’s 2% target in February to hit its highest level since September 2013, with the ONS reporting that the Consumer Price Index (CPI) measure of inflation rose from 1.8% in January to 2.3% last month.

The move – the first above-target rise since November 2013 – will increase pressure on the Bank’s Monetary Policy Committee (MPC) to increase interest rates beyond 0.25% in 2017.

ONS deputy national statistician Jonathan Athow said: “Inflation has risen to its highest rate for almost three-and-a-half years with price increases seen across a range of items but with food and fuel having the largest impact.”