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UK retail sales rise as inflation eases

Retail sales: Shoppers at Oxford Street, London
Retailers report rising sales indicating easing prices is helping boost business. Photo: Mike Kemp/In Pictures via Getty (Mike Kemp via Getty Images)

The UK's retail sector witnessed a 4.1% increase in August, compared with a growth of 1.0% in August 2022 suggesting inflation is easing.

The British Retail Consortium (BRC) reported on Tuesday retail sales outperforming expectations and aligning with the 12-month average growth rate of 4.1%.

BRC data shows total sales, including food, rising. However, online sales show slight dip.

Data spanning from July 30 to 26 August found a 4.1% boost in total sales, much higher than last year's 1% growth.

BCR's findings indicate people seemed to be more interested in grocery shopping, with food sales up by 8.2% over three months and still going strong in August.

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Read more: UK inflation eases to 17-month low

Sale of non-food products particularly for health and beauty had a good period since February as retailers launched new brands on self-care.

Online sales growth of non food change year-on-year (Source: BRC KMPG)
Online sales growth of non food change year-on-year (Source: BRC KMPG) ((Source: BRC KMPG))

Inflation's shadow looms

But not all of the data is good news.

Helen Dickinson, chief executive of the British Retail Consortium said that there though was an improvement in consumer confidence in August but "not all areas benefitted."

“Easing inflation will certainly be welcomed by consumers, but as the rate of price rises falls, so will the extra spending needed by consumers. As a result, sales growth may fall in the coming months, even if volume growth does not. Furthermore, high interest rates and high winter energy bills will put pressure on many households to spend cautiously," she warned.

Read more: Bank of England needs to keep interest rates high, says chief economist

The August shop price index (SPI) from the BRC and the July consumer price index (CPI) from the Office for National Statistics (ONS) both indicate inflation running at higher-than-normal levels.

However, the Bank of England (BoE) remains determined to bring inflation under control, with further monetary policy adjustments against inflation and the uncertainty of the economic landscape. 

The current rate of inflation is 6.4% and the current rate of interest rate is 5.25%.

Paul Martin, UK head of retail, KPMG said that Christmas will be the most crucial period of trading but "savvy shoppers will be Christmas bargain hunting much earlier this year, as price continues to drive decisions and consumers seek out good deals to stretch their budgets."

Read more: Where you can park your money to earn the best interest rates

As the nation grapples with rising prices and economic policies designed to mitigate their impact, the road to recovery may prove to be a more complex journey than anticipated.

Watch: How does inflation affect interest rates?

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