Synovate’s Retail Traffic Index showed a year-on-year decline of 1.8% in August, the strongest comparison against 2009 since February, and better than the forecast of -2.0%. The RTI, which measures the number of visits to non-food stores in the UK, stood 1.3% lower in August than in July.
“Over the course of this summer we have seen something of a steady state of return to non-food shopping in the UK after a spring of turmoil,” said Dr Tim Denison, director of retail intelligence at Synovate Retail Performance.
“For the past three months, national footfall figures have stabilised, hovering around two points below 2009, making us believe that shoppers are lodged in a daily routine once more and, as such, are getting on with everyday life. For the majority, this altered routine includes fewer shopping trips for discretionary goods, less shopping on credit and more attention on saving or repairing financial positions.We are certainly more conscious of our shopping and spending patterns than we were two years ago. Spending power is being squeezed as earnings growth continues to slip against inflation. This is expected to remain the case for the rest of this year.”
The Synovate report also said that retailing is unlikely to be hit as hard, or as soon, as social and recreational pursuits such as eating out and holidaying. In addition, inflation is likely to be more of a friend than a foe to retailers at this point because it helps drive sales value. However, if income growth fails to match the rising cost of living, market conditions are likely to get much tougher for retailers next year.
“There is a real risk that the timing of the VAT increase in January could come just at the wrong time, if inflation is not on the way down by then,” concludes Dr Denison. “Were inflation to remain around 3%, it would certainly put pressure on interest rates which, if raised, would have a far more significant impact on consumer incomes. In the meantime, though, conditions remain in the balance and consumers are inevitably nervous about signing up to any new long-term repayment commitments while there is still pain in the pipeline.”
