There was a run of better news from the high street today, as improving retail sales and a brighter consumer confidence report provided the latest signs of hope for the economy.
It came at the end of a potentially pivotal week. The Bank of England left interest rates on hold for the first time in almost two years yesterday, in a clear sign that policymakers think they are winning their long fight against inflation.
Shoppers getting their wardrobes ready for autumn and snapping up back-to-school bargains helped August retail sales rise 0.4% , led by a 2.3% rise in clothing, with food up 1.2%. World Cup football gave the figures a boost, with an England team in a final for the first time since 1966 helping to keep tills ringing after a spending washout a month earlier.
While the numbers were positive, they did not look hot enough to stir inflation. That is likely to have made welcome reading at the BOE, which ended its run of successive rate hikes at 14 by keeping the base cost of borrowing on hold at 5.25%.
There were more signs within the figures that consumers are continuing to be careful. Cheaper supermarket own-brand goods and non-branded equivalents fared well, especially among back-to-school purchases.
Jacqui Baker at the Retail Group in the Institute of Chartered Accountants said: “World Cup fever helped to create a slight bounce back in retail sales after a disappointing drop in July, but not even the golden touch of the ‘lionesses’ could create a huge win for retailers.”
There was also a sense of cautious optimism from a closely watched barometer of consumer confidence produced by GfK, the analytics company. It hit its best reading since January 2022 at -21 – a four-point improvement – helped by the welcome combination of falling inflation and rising wages.
The same survey showed people are looking at their personal finances carefully. Their assessment there for the next 12 months improved – by a single point to -2 – with the review of the last 12 months better by two points at -13.
GfK’s Joe Staton said: “While this month’s improved headline score is good news, it’s important to note many households are still struggling with the cost-of-living crisis and that economic conditions are tough.”
That was reflected in purchasing managers’ index surveys also out today. PMIs for the dominant services sector and the overall composite reading fell month-on-month, but manufacturing rose.
City experts were encouraged that the high street was heading in the right direction, with discounting easing the cost-of-living crisis.
Victoria Scholar at Interactive Investor, said: “Supermarkets have been cutting prices to try to drive customers into their stores. And private sector wages surpassed inflation for the first time in two years last month, helping improve living standards and reduce affordability pressures.”
For retailers and wider economic growth, much will depend on the high street’s run-up to Christmas.
GfK’s numbers showed that as pressure on everyday household budgets eased, there could be more room for big festive buys. Its “major purchase measure” improved by four points to -20.
The ICA’s Jacqui Baker added: “It’s likely some cost-conscious consumers will start shopping early to make the most of discounts and to spread the cost.”