August is rarely a blockbuster month for the high street, with half the country on holiday and little in the way of fresh shop openings.
Even so, the British Retail Consortium’s sales monitor showed a 3.1% rise in total sales, ahead of July’s pace. Shore Capital calls that “sound momentum”, helped by a favourable comparison base.
Food continues to carry the can, with sales growth of 4.2% over the three months to August, almost entirely price-driven given inflation of 4-5%. Non-food managed 1.8% growth, better than July’s 0.9%, with stores again doing better than online.
None of this disguises the reality of a fragile consumer mood.
Weak confidence
Household confidence remains weak despite interest rates having fallen by 1.25 percentage points from their peak. Savers are sitting on cash piles rather than spending them.
The Starmer government, says Shore Capital, has hardly helped: higher structural costs, a competitive retail environment and looming tax rises have all kept the tills quieter than shopkeepers would like.
With the November Budget around the corner, many retailers could hardly pick a worse time for policy uncertainty.
Housing is another drag. Mortgage approvals are creeping higher but remain well below pre-pandemic levels.
That leaves furniture and homeware sellers short of the usual tailwind from property churn.
Discretionary spending better
Nor is discretionary spending doing much better: the sector remains “challenging and competitive” in Shore Capital’s phrase, with most updates likely to stress how tough conditions are.
There are a few consolations. Grocery, long the defensive mainstay of the sector, remains rationally priced and has attracted investors looking for steady cash returns.
Positive non-food sales in August were a modest encouragement, even if not yet enough to drive earnings upgrades. Shore Capital reckons the upcoming Christmas season and the tax changes expected in November will be more telling for the broader sector view.
Grinding, not bouncing
For now, the message is that UK retail is grinding along rather than bouncing back.
Inflation is easing, but volumes are muted, the consumer is cautious and government policy is adding to the uncertainty.
Investors hoping for a clear read-through on the state of the high street may have to wait until the New Year reporting season. Until then, “challenging and competitive” looks set to remain the retail refrain.