Inflation drives food sales in July as volumes continue to dip

Retail sales slowed in July as inclement weather dampened consumer spend while retail price inflation has slowed, BRC data showed.

UK Total retail sales increased by 1.5 per cent in July, against a growth of 2.3 per cent in July last year. However, like-for-like retail sales fared better, increasing by 1.8 per cent in July, against 1.6 per cent in July 2022.

Food sales increased 8.4 per cent on a Total basis and 8.7 per cent on a like-for-like basis over the three months to July. For the month of July, food was in growth year-on-year.

Non-food sales decreased 0.5 per cent on a Total basis and 0.8 per cent on a like-for-like basis over the three-months to July, and the category was in decline year-on-year for the month of July.

Over the three months to July, in-store non-food sales increased 1.2 per cent on a Total basis and 0.8 per cent on a Like-for-like basis since July 2022. Online non-food sales decreased by 6.9 per cent in July, against a decline of 3.9 per cent in July 2022.

The proportion of non-food items bought online (penetration rate) decreased to 34.7 per cent in July from 35.3 per cent in July 2022.

“The slowing pace of retail price inflation fed through into slower sales this July. Spend was further depressed by the damp weather, which did no favours to sales of clothing, and other seasonal goods,” Helen Dickinson, chief executive of the British Retail Consortium (BRC), said:

“While consumer confidence is generally improving, it remains below longer term levels. And with last week’s rise in interest rates pushing mortgage rates up ever higher, the government must get a handle on the economy, offering a solution to languishing GDP growth in a way that supports both households and businesses.”

Commenting on the food and drink sector performance, Sarah Bradbury, IGD chief executive said: “Food and drink sales continued to grow in July, although the rate of growth was the lowest since January. Sales growth was driven by inflation as volumes remained in negative territory, in part due to the unseasonably wet weather, especially compared to last July’s heatwave.”

Paul Martin, UK head of retail at KPMG, said retailers are increasingly rely on promotions to get shoppers through the door.

“Price conscious consumers are shopping more carefully, more aware of where bargains can be found and what they are getting for their money – which is biting hard into retail margins and profitability,” he said.

“UK consumers have been hugely resilient throughout the cost-of-living crisis, but stubbornly high inflation coupled with rapidly rising interest rates will test their ability and willingness to keep on spending for the rest of this year.

“Both consumers and retailers are finding that they are having to get used to doing more with less as conditions remain incredibly challenging.”