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Retail sales have so far defied reported low levels of consumer confidence

Don Williams, Retail Partner at KPMG, said:

“The warm weather combined with rising prices, saw August sales growth rise by 1% year on year, although volumes will have been challenged.

The heatwave saw strong growth for health items such as suntan lotion, whilst food and drink sales for summer barbeques grew by 5% year on year and home accessories also saw growth for the first time in months.  Online sales dipped by over 6% in August, however the locked in step up of on line penetration remains.

Worryingly, August data revealed a significant fall in clothing sales – the category which has been the most robust performer this year which could signal the start of shoppers pulling back from non-essential spending.

As consumers return from summer holidays to an 80% increase in the energy price cap, double digit inflation and Christmas just 3 pay cheques away, the brakes could be firmly applied on non-essential spending for most UK households.  The storm clouds are closing in as retailers brace themselves for a fall in demand - at a time when their own margins are under pressure from rising costs. Supporting customers through these difficult times will be paramount for the health of the sector as we move through the rest of this year. Doing this will require a more granular understanding of current and prospective customers combined with a focused reappraisal of both the underlying cost base and areas that require investment to drive productivity gains especially with technology. It is in these areas that opportunity lies even in a challenging trading environment.”