Retail sales flatlined last month amid rising inflation, warns trade group

Scottish retail sales flatlined in July as a modest rise in their value was wiped out by the impact of record rising inflation, figures show.

The latest Scottish Retail Consortium-KPMG Scottish Retail Sales Monitor showed that total sales in Scotland increased by 4.4% compared with July 2021, when they had grown 7.4%.

This was above the three-month average increase of 3.5% and below the 12-month average growth of 15%.

However, when adjusted for inflation, the year-on-year change was 0%.

Ewan MacDonald-Russell, deputy head of the Scottish Retail Consortium, said: “In real terms, Scottish retail sales flatlined in August as a modest rise in the value of sales was wiped out by the impact of record rising inflation.

“Food sales rose by 5.3% as shoppers increased their grocery budgets – but that hides the reality that customers’ pounds are buying fewer products.

“Retailers did see shoppers changing their food shopping to purchase more outdoor food to take advantage of the sunshine – but that was instead of other purchases.

“It was a similar story for high street retailers. Whilst summer clothing and items sold well, that was very much at the expense of other items. It appears customers are laser-focused on what they need at the moment when purchasing.”

The figures showed that Scottish sales last month increased by 2.0% on a like-for-like basis compared with July 2021, when they had increased by 6.2%.

Total food sales increased by 5.3% versus July 2021, when they had increased by 1.8%, while total non-food sales increased by 3.7% in July compared with July 2021, when they had increased by 12.1%.

Paul Martin, Partner, UK Head of Retail at KPMG, said: “Scottish consumers continued to spend at the tills in July, despite consumer confidence polls being at an all-time low. Scots were determined to enjoy delayed holidays and a first unrestricted summer with good weather.

“While this growth is positive, it’s likely to change as consumers arrive back from summer breaks to holiday credit card bills, another energy price hike and rising interest rates. With these stronger cost-of-living headwinds on the horizon, consumers will have to prioritise essentials, and discretionary product spending will come under pressure.

“As margins continue to be challenged, and costs continue to rise, a significant drop in demand during the autumn will negatively impact the health of the retail sector.

“Successful retailers will need to carefully anticipate customer buying patterns in the months ahead, and make sure they balance their offering with the right products, prices and promotions.”