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Retail sector outlook brightens after strongest growth in 6 months

Journalist: John Choong (Head of Markets and Research), Newspage

ended 08. October 2024

The outlook for the retail sector could be brightening as we enter the all-important Golden Quarter. Retail sales grew 2% from last year, marking the strongest growth rate in 6 months, and an improvement from August's 0.8%, according to the latest British Retail Consortium (BRC) Retail Sales Monitor. On a like-for-like basis, sales grew 1.7% from last month's 0.8%, and beating consensus estimates of 1.1%.

Food sales ticked higher to 3.1% from 2.9% in August. However, it was non-food sales which saw the biggest improvement to -0.3% from -1.7%, albeit still in negative territory. 

BRC CEO Helen Dickinson said, "As autumn rolled out across the UK, shoppers sought to update their wardrobes with coats, boots, and knitwear. However, ongoing concerns of consumers about the financial outlook kept demand low for big-ticket items such as furniture and white goods”.

Newspage asked economists, analysts, and traders for their thoughts on what this spells for the retail sector moving forward into the Golden Quarter, the cost-of-living crisis, and the UK economy.

4 responses from the Newspage community

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Editor
Riz Malik
Independent Financial Adviser at R3 Wealth
It looks like it’s not all doom and gloom in the retail sector after all. The latest BRC print is evidence that cost-of-living pressures are indeed, easing even slightly, as the impact of positive real wage growth along with lower inflation comes into play.

However, with a potentially spooky Budget around the corner, consumer confidence is still fragile. As such, the outlook for the sector will rest on how well Reeves manages the expectations of the bond market, as a retrenchment in bond yields could ease mortgage rates and cost-of-living pressures, while any further spikes could derail the current recovery being seen in the retail industry.
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Editor
David Belle
Founder and Trader at Fink Money
I reckon we're still, in a lot of data sets, experiencing some base rate neglect. If we look at 2023's Y/Y data, we're still seeing feed through from the troubling 2022 year of high energy prices.

This means the current data is objectively VERY good, in my view, mainly due to the fact real wages are up. A strong consumer means strong growth, and in the current environment, this is what is key.
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John Choong
Head of Equities and Markets at Investors Edge
The retail sector's pulse is quickening as we enter the Golden Quarter, but caution still remains the watchword, as this recovery is as fragile as it is promising.

The uptick in non-food sales, driven by seasonal wardrobe updates, masks a deeper reluctance towards big-ticket purchases. This dichotomy reflects a consumer base caught between the desire to indulge and the need to remain financially prudent in uncertain times. Yet, there's room for optimism and for further sales growth to be realised from positive real wage growth and a reviving housing market.

But with the Budget looming and gilt yields (the cost of borrowing) fluctuating, consumer confidence has been shaky. A misstep on the 30th could easily derail the sector's fragile recovery, echoing the fallout from 2022's ill-fated Mini-Budget. But as long as Reeves can bolster consumer confidence without triggering another bond market fallout, we see the retail sector rebounding further in 2025.
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Gabriel McKeown
Head of Macroeconomics at The Sad Rabbit Newsletter
From autumn chill to retail thrill, UK shoppers are warming up to spending, breathing new life into a sector that's been left out in the cold. The latest figures from the BRC reveal an unexpected acceleration in sales growth, offering a glimmer of hope amidst the economic gloom.

Given the ongoing cost-of-living crisis, these figures suggest a resilience in spending that many had not anticipated, signalling a turning point for an industry facing significant headwinds. However, concerns about consumer confidence linger, as while consumers are willing to spend on seasonal necessities, they remain hesitant about making larger financial commitments.

Consequently, the public’s response to the upcoming ‘painful’ Budget could significantly impact retail performance in the crucial pre-Christmas period. Furthermore, this stonking retail sales data presents a conundrum for the BoE, as while inflation has begun to stabilise, this increase in spending could reignite inflationary pressures.