UK shoppers, feeling the inflation hit, cut back on non-essentials

British shoppers are cutting back on purchases of clothes and other non-essential items as they try to cover their sky-rocketing utility bills and higher food prices, surveys showed on Tuesday.

With the country's next prime minister Liz Truss promising help to tackle the cost-of-living crisis, the British Retail Consortium said the value of total sales at its members – mostly large chains and major supermarkets – rose by 1.0% last month compared to August 2021, weaker than July's 2.3% increase.

On a like-for-like basis, ironing out changes in shop floor space, sales rose by 0.5%, slowing from July's 1.6% rise.

The figures are not adjusted for inflation, meaning the small rise in sales masked a much larger drop in volumes.

"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," Don Williams, a retail partner at KPMG which co-produces the data, said.

The belt-tightening by British households could be an early sign of a recession to come. The Bank of England has forecast Britain's economy will go into recession at the end of the year and will only emerge from it in early 2024.

Separate data from Barclaycard showed spending on consumer payment cards grew by an annual 4.7% in August, the smallest increase since March 2021, with outlays on essential items such as food up by 7.2%, the highest increase since December 2021.

At the same time, average utility bills per customer climbed by 45.2%.

Clothing retailers saw an almost 2% fall in sales compared to August 2021, while department store sales were down by 4.3% and overseas travel also dropped.

But the domestic travel and hospitality sectors benefited from the warm weather and rise in staycations, as local hotels, resorts, pubs, and clubs all saw growing sales.

Britons are contending with inflation that surpassed 10% in July, driven mostly by the surge in energy prices. Goldman Sachs says it could hit 22% in early 2023 if gas prices stay high.

Barclaycard said a survey it conducted showed that 60% of consumers were feeling confident in their ability to get through the cost-of-living storm, down from 66% in July.

"Many Brits plan to continue cutting back on their discretionary spending during the autumn and winter, while adopting a resourceful approach to saving money in order to weather a challenging period ahead," said Jose Carvalho, head of consumer products at Barclaycard.