The latest retail data released by Ipsos Retail Performance show that UK retail recovery is still on track, particularly in the southern half of the country. The UK Retail Traffic Index showed that the number of visits by consumers to non-food retail stores in August barely dipped against July. The marginal decline of 0.7% compares to a five year average of -2.0%. The gap in shopper footfall compared to 2012 levels also narrowed in the month, reducing from -4.4% in July to -4.2% in August.
"Slowly but surely, shopping is finding its way back onto the radar of UK consumers," says Dr Tim Denison, Director of Retail Intelligence at Ipsos Retail Performance. "The monthly figures have continually shown gradual improvement over summer months from which retailers can take some heart. There is growing evidence that this summer has seen the makings of a significant shift in consumer sentiment rather than spikes driven by a series of short term factors."
The rapid improvement in consumer confidence can, to a large degree, be attributed to the recent strengthening of the economy. The upward revision of GDP to +0.7% in Quarter 2 serves to emphasise that the outlook is becoming more positive. The fact that growth was largely attributable to stronger exports as well as growth in the manufacturing and investment sectors, rather than being consumer led, is further evidence that the UK economy is becoming more balanced and the recovery therefore more likely to be stable as a consequence.
Consumers can be reassured that interest rates are likely to remain unchanged for another three years, based on the Bank of England's new 'forward guidance' approach. This is welcome news to spenders, particularly as inflation appears to be on the wane after peaking at 2.9% in June. Further assistance comes in the form of falling mortgage costs which are at a 14 year low. Lending to first time buyers is up 30% on last year, according to the Council of Mortgage Lenders.
"Despite real income levels still playing catch-up, householders' reviving appetite towards shopping is largely thanks to a double helping of a growing economy and falling inflation," explains Denison. "Retailers continue to play their part by keeping prices as competitive as possible, helping to take the edge off comparatively lower wage rises. There is a sense, particularly in the southern half of the UK, that everyday life is becoming affordable again and retail spending is no longer on hold."
Retail footfall continues to be polarised with the North of England and the Midlands remaining depressed in August compared to the rest of the country. The fine summer weather has also encouraged more people to holiday at home in the UK, leading to a boost to footfall in South West England & Wales in particular.
Regional Year-on-year change in footfall / Month-on-month change in footfall
Scotland & Northern Ireland
-3.3% / -1.1%
North of England
-7.6% / -2.6%
-10.2% / -2.7%
South West England & Wales
-3.2% / +5.2%
South East England & London
+2.0% / -0.2%