Retail reacts to July 2022 ONS data: "the calm before the storm"
The Office for National Statistics (ONS) revealed that retail sales in July continued to show long-term signs that consumers are making cutbacks to save money amid soaring inflation.
The ONS said retail sales lifted by 0.3% in July, significantly higher than economists’ expectations of a 0.2% drop. However, sales fell by 1.2% in the three months to July, reflecting a gradual decline in spending since the previous summer as the cost-of-living crunch squeezes people’s wallets.
Key experts across the fashion and retail industry reacted to the July 2022 data:
Kelly Miely, Retail Partner at Deloitte:
"Despite inflation approaching double digits, retail sales values only increased a further 1.3% in July, while sales volumes rose slightly by 0.3%. However, retailers continued to feel the heat as sales over a three month period indicated an ongoing decline since last summer.
"Though some retailers will be relieved to see volume and value sales grow month on month, the reality is that they are being forced to choose between margins being squeezed or passing on costs to consumers. This is a particular problem for food retailers, where prices of everyday essentials are typically most exposed to inflation, so despite consumers trimming their shopping baskets, they are still facing higher receipts at the checkout."
Silvia Rindone, EY UK & Ireland Retail Lead:
"Despite the surprise rise in July, the overall picture is much gloomier. Retailers face challenging trading conditions with consumers expected to pare back spending as the rising cost-of-living affects confidence. This will especially affect the non-discretionary sector as consumers are already tightening their belts as they prepare for what they know is to come.
"The real impact of this slowdown is likely to be felt in the autumn just as many retailers prepare for the all-important ‘golden quarter’ in the lead up to Christmas. Retail, along with hospitality businesses, which are highly sensitive to fluctuations in consumer demand, will be most exposed.
"It will continue to be a really challenging balance for retailers to strike between managing cost increases and managing price increases. They need to keep an eye on driving revenue while not affecting profitability too much, as well as trying to capture demand that is still there while managing supply costs and inflation.
"It is vital that retailers review their customer base and look at what impact price rises could have. Retailers can potentially mitigate the impact of price increases by thinking strategically, segmenting their market, and being smart about how and where they apply price increases. It’s clear that a ‘one-size fits all’ model will no longer work."
Helen Dickinson, CEO of the British Retail Consortium:
"The summer sunshine brought a slight uplift in sales. Summer clothing, air conditioning appliances and outdoor foods all benefitted from record temperatures, but most retailers will still be seeing falling volumes in the face of rising inflation.
"Consumer confidence has hit new lows as inflation soared past 10% and talk of a recession has grown. The Bank of England expects inflation to reach over 13% in October when energy bills rise again, further limiting discretionary spending for struggling households. For many businesses, 2022 is proving to be every bit as challenging as the pandemic."
Dr Jackie Mulligan, Government High Streets Task Force expert and ShopAppy Founder:
"The three month decline of 1.2% paints a much more accurate picture of the UK high street than the July figure alone. People just aren't spending amid the cost of living crisis. It's no surprise to see clothing and household goods continue to be hit particularly hard. Retailers selling non-essentials are in a highly precarious position as inflation hits double digits.
"The family businesses that line our high streets are being seriously challenged at present and this comes on top of two arduous years. They are facing a triple whammy of rising costs at home, rising costs in their business and financially squeezed customers who are spending less. The best thing we can all do is shop with them because any purchase from a local shop is an investment in our community."
Darren Morgan, ONS Director of Economic Statistics:
"Retail sales nudged up very slightly in July, but looking at the longer-term picture, they are continuing the downward trend which started last summer.
"Online sales did pick up this month, as retailers told us that sales were boosted by a range of offers and promotions. Clothing and household goods sales declined again, with feedback continuing to indicate consumers are cutting back due to increased prices and concerns around affordability and cost of living.”
Lynda Petherick, Retail Lead at Accenture:
"This is likely to be the calm before the storm as it’s hard to ignore the news that inflation rose to a 40-year high of 10.1% this week. Even if consumers continue their shopping spree in August, retailers can anticipate further challenges ahead as households are forced to make difficult choices.“
"As businesses prepare for a challenging autumn and winter, the immediate instinct for many will be to cut spending plans to offset any future decline in sales. However, now is the time for retailers to stay focused on the long term. While their sales are still in the black, retailers need to take a holistic view of their cost base now. Whether that’s modernising their tech to increase efficiency or reviewing their overall business costs, this will be key to increasing their resilience and retaining market share."
Richard Lim, CEO of Retail Economics:
"Cutting back on ‘nice-to-haves’, trading down to cheaper alternatives and delaying non-essential spending are all coming into play as a more cost-conscious consumer emerges. Sales volumes declined across both food and non-food compared with the previous year, as consumers tighten their belts.
"The outlook is as tough as I can recall. Inflation is still yet to peak, and the impact of rising interest rates takes time to trickle through to households. Consumer confidence has hit an all-time low and even those that do have cash to spend will be more inclined to bolster their rainy-day fund given such an uncertain outlook."