Record warm weather and a Bank of England interest rate cut lifted retail sales in August, according to the latest survey, but retailers fear that speculation about tax rises could weigh on consumers in the crucial pre-Christmas trading period.
Retail sales increased 3.1% year on year as consumer spending on food and drink rose, and sales of computers and related equipment performed well as parents readied children for the new school year.
However, the British Retail Consortium (BRC), which publishes the monthly figures in conjunction with KPMG, said the 4.7% boost in spending on food and drink was due to price rises as opposed to consumers buying more products.
The report said food inflation was driven by rising prices across staples including beef, chocolate and coffee.
And while computing – and gaming – continued to show strong sales, parents facing an expensive start to the new school year cut back on buying uniforms.
The BRC said businesses were concerned about sales in the golden quarter, the crucial three-month period in the run-up to Christmas that many retailers rely on for the bulk of their revenues.
“Sunny weather and an interest rate cut helped August round off a solid summer of sales,” said the chief executive, Helen Dickinson. “Despite a better summer, retailers approach the golden quarter with caution.
“With the later-than-expected budget falling just days before Black Friday [discount sales], many are uneasy about how consumer confidence and spending could be impacted by tax rise speculation in the run-up to Christmas.”
Last week, the chancellor, Rachel Reeves, announced the budget would be held on 26 November, later than many had expected.
Last month’s sales increase followed a rise of 2.5% in July, fuelled by warm weather and England’s successful Euros football campaign, and 3.1% in June.
The latest report also found furniture sales grew for the second month in a row, after months of decline, as did home goods such as appliances, DIY products and garden tools.
Linda Ellett, the head of consumer, retail and leisure at KPMG, said: “Sales of many home goods have been seeing monthly increases since the spike in property transactions ahead of the changes to stamp duty in April.
“Home appliances, accessories and DIY and garden tools all saw sales growth in August. New product launches also boosted mobile phone sales.”
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In late July and August, Samsung launched two models of its Galaxy foldable phone, and Google rolled out the Pixel 10.
Overall non-food sales increased by 1.8% year on year last month, the third consecutive monthly increase.
However, the report also found that shopper confidence fell for the third consecutive month in August, with many expecting further food price inflation and other financial pressures.
Sarah Bradbury, the chief executive of the Institute of Grocery Distribution, said: “The emotional weight of rising energy bills and fears of tax hikes in the autumn budget are adding to the strain, especially as unemployment ticks upward
“Yet there are glimmers of relief: interest rates have been cut again, and mortgage rates are easing, offering some financial respite. Financially resilient shoppers may remain more confident, even as they brace for a challenging winter.”