Shoppers have tightened their belts as worries about the cost living crisis and potential tax rises lead many to prioritise saving ahead of Christmas.
Food and drink sales rose 3.5% year on year in the four weeks between 5 October and 1 November, according to the latest data BRC-KPMG Retail Sales Monitor.
However, despite food prices falling at their fastest rate for almost five years to 3.7% in October, the rise in spending was still largely due to inflation rather than an increase in volumes. Growth overall was flat against the 12-month average.
Total retail sales increased 1.6% year on year, up from 0.6% compared to the same period in 2024. However this was well below the 2.1% average 12-month growth as shoppers dialled back spending ahead of Christmas.
“October was a subdued month, with the weakest growth since May. Many delayed spending, waiting for Black Friday deals and cooler temperatures before buying toys, electronics and clothing,” said BRC CEO Helen Dickinson.
“Furniture and other homeware fared better as people began preparing their homes ahead of family festive gatherings. Food sales also saw good growth, but this was mostly driven by higher prices rather than higher volumes.”
Looking ahead to the “looming” autumn budget on 26 November, in which Chancellor Rachel Reeves has strongly hinted she plans to raise taxes, Dickinson warned No 11 not to risk undermining “fragile” consumer confidence.
“With demand weak and business rates unresolved, retailers face hard choices on investment and recruitment. A business rates surtax on retail would put major stores and thousands of jobs at risk. The Chancellor should use the budget to remove this threat and help curb inflation for businesses and families.”
Shoppers controlling spend ‘tightly’ to save for Christmas
Non-food sales were also subdued, with in-store sales up 0.1% year on year. Online non-food sales were flat at 0.0%, compared to 0.4% growth in October last year. Overall online penetration – the proportion of non-food items purchased online – grew to 37.9%, up from 37.8%.
“Shopper focus has shifted towards controlling their spending more tightly this month for food and grocery shopping,” said Institute for Grocery Distribution (IGD) CEO Sarah Bradbury.
“Confidence has dipped, with shoppers prioritising saving money over quality for the first time this year. The news of potential tax rises will concern many shoppers, even as food price inflation eased somewhat. With the job market stalling and the gap between pay growth and price rises narrowing, overall shoppers aren’t feeling much benefit,” Bradbury said.
Shoppers would be “extra cautious” over coming months to ensure they can afford to treat themselves at Christmas, IGD predicted.
“Depending on the impact of the budget, the festive period will provide opportunities for trade-up,” Bradbury said.
“Earlier this year, we saw in our research many shoppers indicated they planned to buy more premium private-label products and opt for specific brands. If they stick to these intentions, it could provide a boost to spending.”
No comments yet