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News - 16 October 2009

Are consumers venturing back onto the high street?

The answer is yes according to the latest figures from the British Retail Consortium (BRC). They suggest that consumer confidence is creeping back but will it be enough to sustain business through what, for many will be a make or break Christmas.

UK retail sales values In September rose 2.8% on a like-for-like basis from the same month in 2008, when sales had actually fallen 1.5%, due to turmoil in financial markets hitting consumer confidence and very wet weather. In addition, Bank Holiday Sunday and Monday fell in the September trading period in 2009 but not in 2008. On a total basis including new floorspace, sales rose 4.9% against a 1.0% gain in September 2008.

Food sales growth slowed further, largely reflecting lower food price inflation. Clothing and footwear picked up and homewares and furniture sales also rose above last September's very weak levels, helped by some improvement in consumer confidence and the housing market.

Non-food non-store sales (internet, mail-order and phone sales) in September were 11.9% higher than a year ago compared with 7.9% in August. The faster growth rate in September than in August was in line with the pick-up in store sales. Postal strikes are now a serious concern for online retailers.

Stephen Robertson, Director General, British Retail Consortium, said, "For some customers confidence is trickling back. These are the best total sales growth figures since January 2008. But we mustn't get carried away. They are compared with a weak performance last September.

"For the last couple of years food has been the main driver of overall sales growth but this September lower food inflation has pulled food sales growth down to its weakest since March 2008. By contrast, it's good to see nearly all the non-food categories turned positive.

"As we enter the important run-up to Christmas, these results give some room for optimism. But consumer sentiment is volatile and could weaken again and, throughout the final quarter, all the comparisons will be with poor figures last year when total sales growth dropped below zero."

Helen Dickinson, Head of Retail, KPMG, said, "The results for September and the rest of 2009 need to be considered in the light of last year's performance, which weakened as the year progressed. However, the pick-up in this month's figures is stronger than expected. Sunny autumn weather and signs of a less gloomy economic outlook have boosted non-food sales, particularly in children's clothing and footwear, and furniture and flooring. But the results are certainly not a clear sign of underlying strength in

consumer spending, given the ongoing volatility in performance – by sector, by retailer and by week for individual retailers. Growth in the value of food sales is continuing to slow as food inflation eases."

Food & Drink - Joanne Denney-Finch, Chief Executive, IGD, said, "The food and grocery market is still growing, although last month that growth slowed a little. Much of this change is because food inflation is lower. As inflation continues to diminish, grocery retailers will be pulling out all the stops to drive volume growth as we approach key seasonal trading events such as Halloween, Bonfire Night, and of course Christmas.

"However, with tough times still expected ahead, shoppers are telling us that they are not going to return to their previous carefree behaviour. Around 54% expect to be careful in their spending habits in the future while only 5% think they might be more frivolous."

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