© Reuters. FILE PHOTO: The coronavirus disease (COVID-19) outbreak in London
By David Milliken and Andy Bruce
LONDON (Reuters) – British shoppers spent more money last month and brought sales further above pre-COVID levels as strong online demand helped much of the sector recover faster than the rest of the economy.
Retail sales rose 0.8% in August, the bureau of national statistics said on Friday – slightly above the average forecast in a Reuters poll. Compared to the previous year, they rose by 2.8% and were thus just below the forecast of annual growth of 3.0%.
Sales had already exceeded pre-COVID levels in July and are now 4.0% higher than pre-crisis levels, although economists are cautious about what will happen later this year when unemployment spikes sharply as forecast.
"Spending could still stutter as the vacation program ends and unemployment rises, hurting household incomes and job security. Other parts of the economy, such as investment, take much longer to recover," said Andrew Wishart of the consultancy Capital Economics.
Retailers have benefited from fewer Britons vacationing overseas this summer, demand pent-up from the lockdown, and spending on housewares shifting rather than off-home activities, economists say.
However, the rebound hides a sharp division between online and high street retailers. Online and mail order sales rose 34.4% year over year in August, while most traditional non-grocery retailers lost ground.
"Overall, the move to higher online sales means the main drag continues to be under pressure," said Jonathan Athow, ONS assistant national statistician.
(Graphic: UK retail recovery due to online sales, https://fingfx.thomsonreuters.com/gfx/polling/xlbvgjogkpq/Pasted%20image%201600412936985.png)
HIGH STREET SQUEEZED
The traditional retail crisis is affecting commercial landlords as stores close and tenants like clothing chain New Look seek to renegotiate rents to link them to sales.
The upscale department store chain John Lewis wrote down the value of its stores by £ 470 million in results released on Thursday and canceled its annual employee bonus for the first time since 1953.
Apparel sales rose 13.5% in August compared to the previous month, but were still 15.5% below the previous year's figure. According to the ONS, 86% of clothing stores still reported fewer buyers than they did before the pandemic.
Grocery sales rose just 0.4% in August, after strong growth in recent months when the British had eaten more at home.
In August, there was a temporary state promotion for dining in restaurants called "Eat Out to Help Out," which earlier industry data had put pressure on food demand.
The Bank of England announced on Thursday that the UK economy has been recovering at a faster pace than forecast in August. However, production in the period July to September is still expected to be 7% lower than in the last quarter of 2019.
Britain suffered the biggest economic blow of any G7 economy between April and June when production fell more than 20%.
The BoE identified consumer demand as one of the brighter spots, but said it was vulnerable to spikes in COVID-19 cases as well as spikes in unemployment.
The UK retail consortium urged the government to allow non-essential stores to remain open even when other stores are closed due to local lockdowns in an attempt to stamp out spikes in COVID cases.