UK retail sales dropped in August for the fourth consecutive month as grocery sales were impacted by more people returning to restaurants and pubs, according to official figures.
The Office for National Statistics (ONS) said retail sales volumes dropped by 0.9% last month, following a 2.8% fall in July. However, retail sales volumes remain 4.6% ahead of pre-pandemic levels.
The drop in sales for August came as a surprise to analysts, who had forecast a 0.7% increase for the month. It represents the first time since 1996 that retail sales have dropped for four months in a row.
Jonathan Athow, ONS deputy national statistician for economic statistics, said: “Sales fell again in August, though not nearly as much as in July, and, overall, remained above their pre-pandemic level.
“Other data suggest that the drop in food stores’ sales is linked to an increase in eating out following the lifting of coronavirus restrictions.
“Meanwhile, motor fuel sales increased on the month as people ventured out more, but they remained below pre-pandemic levels.”
Food store sales slipped by 1.2% for the month, with many shoppers returning further back towards pre-pandemic habits.
It comes as data from Open Table has shown that restaurant reservations picked up last month while credit card providers highlighted a rebound in social spending.
Meanwhile, non-food stores reported a 1% decline in sales volumes, driven partly by department stores, which saw a 3.7% plunge for the month.
Motor fuel sales volumes rose by 1.5% for the month as people continued to increase their amount of travel, although this remains below pre-pandemic levels.
The ONS also highlighted that, in the two weeks to 22 August, around 6.5% of retailers said they were unable to get the materials, goods or services they needed due to ongoing supply chain challenges.
Department stores highlighted the biggest difficulties, with 18.2% of these companies stressing issues.
Meanwhile, 22% of food stores said they were able to source products they needed but had to change suppliers or find alternative solutions.
Karen Johnson, head of retail & wholesale at Barclays Corporate Banking
“Whilst last month saw record temperatures across many parts of the UK, grocery spending cooled in August as the public chose dining out over evenings at home. Fortunately for UK retail, clothing sales helped turn up the heat – with summer holidays, back to school and return to office all fuelling spending over this period.
“Looking ahead, we can expect to see sales figures return to some kind of normality as the nation settles itself into the post-lockdown world. It has been great to see consumer confidence remaining strong, and now the whole sector will be hoping that supply issues won’t pose too much of a challenge for meeting demand in the coming months.”
Emma-Lou Montgomery, associate director at Fidelity International
“After a dramatic fall in July, retail sales volumes once again fell in August, as shoppers yet again stayed away from the high street. Now, with fewer than 100 days now until Christmas, retailers will be desperately hoping to see the boost in sales that traditionally goes hand in hand with the festive period. There do appear to be some signs of optimism, with John Lewis and Waitrose announcing they will be hiring thousands of extra workers to support the festive shopping season. And with the summer proving so disappointing, retailers will no doubt be hoping to pick up the slack with key shopping dates like Black Friday.
“But plenty of challenges stand in their way. Recovery has been bumpy across the sector with many retailers dealing with supply chain disruption and labour shortages. Rising prices across the board will also be starting to pile pressure on households and could continue to hamper buying habits down the line.”
Erin Brookes, managing director at Alvarez & Marsal’s European retail and consumer practice
“Today’s figures should remind retailers to start planning for Christmas, which could be one of the most exciting on record, especially given restrictions last year.
“It will be critical to understand consumer demands and solidify nimble and responsive supply chains, which are only as strong as their weakest link.
“Despite the turbulent times, businesses should be asking themselves how to bolster and diversify their supply chains so that they are not just focusing on immediate issues but are also future-proofing their business against long-term changes in consumer habits.”
Huw Phillips, head of sales at retail finance platform Deko
“The 0.9% fall of retail sales volumes in August marks an unexpected dip in comparison to forecasts. Whilst this indicates a slowing of momentum in the consumer recovery, a wider view of volumes indicates a slightly more positive trend, with growth of 0.3% in the three months to August compared to the previous three. Retail sales volumes were also 4.6% higher than pre-pandemic levels of February 2020.
“It is particularly interesting that online spending values rose in August, seeing 1.5% growth from July. Although online food, department store and textile sales fell, the proportion of online retail spending values increased from 27.1% to 27.7% in the period. This total is notably higher than pre-pandemic levels of 17.7% in February 2020.
“These trends continue to suggest that consumer behaviours are shifting towards online spending even though in-person stores have re-opened. As the sector heads towards the peak season, retailers should consider upgrading their operations to match the turn to e-commerce in order to maximise sales, for example through the integration and provision of alternative payment options. These would especially aid in the completion of sales with larger basket sizes, which is particularly apt given the 5.8% increase of online spending values in other stores which likely stock higher-value items – such as sports equipment and computer and telecoms – seen throughout August.”