The weakest underlying performance by high street and online stores since the depth of the 2008-09
recession provided fresh evidence on Tuesday of a slowdown in the economy.
An unusually warm September, the continued weakness of spending in supermarkets and a dip in the
rapid growth of internet sales meant spending dropped sharply last month, the British Retail Consortium
said.
In its monthly health check conducted jointly with KPMG, the BRC said total sales were 0.8% lower in
September 2014 than in the same month a year earlier. The year-on-year drop in consumer spending
was the most pronounced since December 2008, apart from months affected by the timing of Easter.
The BRC took comfort from the fact that spending on big-ticket items such as furniture continued to
be strong, but the report comes after a slew of recent data pointing to an easing of activity in the
second half of 2014.
The chancellor, George Osborne, said last week that the problems of the eurozone were already
having an impact on the UK economy, and the Bank of England is also detecting signs that the
rapid pace of growth seen since the spring of 2013 will not be maintained.
Mark Carney, the Bank’s governor, said in interviews in Washington that stalling growth in the eurozone
would be only one of the factors that would affect the timing of an increase in interest rates but accepted
that slower global growth would bear down on inflation.
After the recent run of data, the City is now expecting the first increase in borrowing costs to be in the
middle of 2015, around the time of the general election. Carney said the Bank’s nine-strong monetary
policy committee would not be swayed by political considerations.
Helen Dickinson, the director general of the British Retail Consortium, said: “In September, we saw the
lowest retail sales figures since December 2008, excluding Easter distortions. This can be attributed to
a number of factors including the continuing decline in food sales. Furthermore, there was exceptionally
low demand for items such as boots and coats, resulting in the lowest fashion sales performance since
April 2012. However, demand for big-ticket items continues to be strong, with furniture outperforming
all other categories.”
David McCorquodale, head of retail at KPMG, said sales of winter fashion lines had been affected by
September’s Indian summer. “Selling woolly jumpers in warm weather is a tough ask, even for the
most talented of sales staff.”
Like-for-like sales – which strip out the impact of increases from new shop openings – were 2.1% down
on a year earlier. In the three months to September – considered a better guide to the underlying trend
than the figures for one month – like-for-like sales of food were 3.6% down on the same months of 2013,
while like-for-like sales in all categories were 0.5% weaker.
McCorquodale said: “After a bumper summer, this is a disappointing outcome for retailers and has
undoubtedly reversed some of the sales gains made in August. However, if temperatures drop to a more
seasonal level this cooler weather will quickly turn around retailers’ fortunes and help them to sell their
autumn-winter ranges.
“The grocers had another challenging month, with further price cuts and promotions announced by most.
With a rebasing of margins in the grocery sector throughout the year, this final quarter will see sales go
to those who are most focused on their customers.”
While online retail activity now accounts for more than one pound in every six spent by consumers, online
non-food sales are growing less strongly than they were a year ago, the BRC/KPMG retail sales monitor
showed. Sales were 8.2% up on September 2013, while they were increasing at an annual rate of 13.4%
a year ago.
Carney told CNN news that the Bank of England had already forecast that Britain’s growth rates would
slow slightly towards the end of 2014, and the Bank would continue to keep a close eye on domestic
inflation pressures that might come from the strong pick-up in wages in the tightening labour market.
In the three months ending in June, gross domestic product increased by 0.9%.
Carney said in a separate interview with CNBC television that the slowdown in Europe’s recovery did not
compare with the scale of the crisis in the single currency zone in recent years when Greece was at risk
of dropping out of the euro.
“This is a chronic phase of European adjustment,” Carney said. “We’re not back in the acute phase, back
into that period of a couple of years ago.”
