According to figures released by the Confederation of British Industry on Thursday, British retailers reported their strongest sales in August in nine months, defying predictions for a decline as the cost-of-living squeeze hits households.
The CBI’s retail sales balance for August increased from -4 in July to +37 in August. Most of the economists surveyed by Reuters had predicted a decline to -7.
According to economist Samuel Tombs of the consultancy Pantheon Macroeconomics, the increase in sales in August was likely caused by emergency cost-of-living grants given to welfare recipients in late July as a result of a support package announced by the former finance minister Rishi Sunak in May.
“With low-income households, who had to cut back severely in Q2, receiving the most support from the government, it is unsurprising that retail sales have benefited immediately,” Tombs said in a note to clients.
According to analysts at Citi, consumer price inflation reached a 40-year high of 10.1 per cent in July and is predicted to continue increasing as energy prices rise as a result of Russia’s invasion of Ukraine, possibly reaching 18%.
Both of the two candidates for the position of British prime minister have pledged to provide more assistance to households. Liz Truss, the foreign minister, says she prefers to reduce taxes, whereas Sunak says he prefers to concentrate on providing targeted assistance for low-income households.
The CBI survey revealed how much inflation pressure is still growing in the British economy.
A quarterly indicator of average selling price inflation increased from +77 in May to +87, which is the fastest rate since 1985.
In September, a similar rate of price growth was predicted.
Despite an increase in sales in August, according to CBI principal economist Martin Sartorius, businesses are more pessimistic about the coming three months of business than they have been since Britain’s first COVID-19 lockdown in 2020.
“This gloom is reflected in retailers’ investment intentions, which continue to be resolutely negative,” he said.
The CBI survey was based on responses from 60 retailers between July 27 and Aug. 12.
(Adapted from LSE.co.uk)