Sales growth in shops in Great Britain slowed last month as an increase in purchases of technology was tempered by the largest monthly fall in spending at supermarkets this year.
The last official snapshot of consumer activity before the budget showed a modest 0.3% increase in spending in shops and online – down on August’s 1% increase but better than financial markets had expected.
Despite warnings from the chancellor, Rachel Reeves, for the public to be braced for tax increases in the budget on 30 October, the data from the Office for National Statistics (ONS) provided evidence of falling inflation and rising real incomes encouraging consumers to spend more freely.
Sales growth in the third quarter of 2024 – a better guide to the underlying trend than one month’s figures – rose by 1.9%, compared with a fall of 0.2% in the second quarter.
Amid reports that consumer confidence has dropped sharply on fears of a tough budget, the consensus among economists was that retail sales volumes would fall by 0.3% in September.
Retail sales do not include some big-ticket items of consumer spending – including foreign travel and car sales – but the better-than-expected September figure will be a boost to Reeves as she puts the finishing touches to her tax and spending plans.
The ONS said sales volumes at all non-food stores – which include clothing, household and department stores – rose by 2.5% in September.
This was underpinned by 5.5% month-on-month growth from “other” non-food stores, led by a bumper month for computer and mobile phone retailers, which were buoyed by product launches such as Apple’s new iPhone 16.
Analysts suggested this was partly down to parents stocking up for pupils as the new school year started. Oliver Vernon-Harcourt, the head of retail at Deloitte, said: “A back-to-school boost saw retail sales rise for a third consecutive month, with sales of computers and additional clothing and footwear bolstering growth. While many consumers continue to hold back on purchasing big-ticket items, the sale of smaller non-essential luxuries has propped up sales values.”
However, this was partly offset by a 2.4% fall in sales at supermarkets, the largest month-on-month fall for food stores this year.
“Retail sales grew in September as tech stores reported a notable rise in sales,” said Hannah Finselbach, a senior statistician at the ONS. “These were only partially offset by a poor month for supermarkets, where retailers said bad weather and households continuing to cut back on luxury food items hit sales.”
Sales volumes rose 3.9% across the year to the end of September, the largest annual rise since February 2022.
“September saw the strongest retail sales growth since January, and the highest sales volume since March 2022,” said Kris Hamer, the director of Insight at the British Retail Consortium. “[However], big-ticket items, such as furniture and other household goods, continued to take the hit from some consumers, such as those saving for Christmas or preferring to spend their money on experiences.”
Despite the rise, Hamer said retailers were “nervously” awaiting the budget at the end of the month, particularly the impact of a possible increase to employer national insurance contributions, as well as the annual inflationary increase to business rates next year.
“These changes would add more pressure to an industry that already pays far more than its fair share in business taxes,” Hamer said. “The chancellor should use the budget to level the playing field with other parts of the economy.”
Asif Aziz, the retail director at EE, said the mobile phone operator had enjoyed a fillip from the launch of the iPhone 16, with pre-orders beginning on 13 September and the handset arriving in stores a week later.
He said: “These are welcome signs of light in the autumnal gloom, but as we enter the critical ‘golden quarter’ [running up to Christmas], retailers will be hoping the rise in energy bills and a potentially difficult budget will not dent this positive momentum.”
