BRC expects little cheer for UK retail sales this year
The New Year may be a time to look forward, but the retail sector will have little to look forward to in 2023, according to the British Retail Consortium.
The trade body has issued new analysis and said it thinks retail sales will grow between 2.3% and 3.5% this year. Given that inflation remains in double digits and is likely to stay in high single digits even as it eases throughout the year, that's not an encouraging percentage range.
The BRC said: “The past year has been characterised by low retail sales growth, which has remained below current inflation, suggesting volumes were down compared to 2021. The trend is expected to continue into 2023.”
It also thinks that food sales growth will continue to outperform non-food categories as cash-strapped consumers carry on prioritising essentials over discretionary purchases.
That said, the BRC is expecting sales to pick up in the second half as inflation slows and consumer confidence improves. But it’s still only expecting growth of between 3.6% and 4.7% in H2. Not only that, but the slightly higher growth predicted for the second half means that the overall annual prediction masks an even worse forecast for the first half. In the first six months of the year, it's expecting sales to rise only between 1% and 2.3%.
It also said that total retail sales growth for 2022 added up to only 2.3%, and once inflation (that rose to more than 11% across the economy) is accounted for, it means falls in sales volumes for both food and non-food.
Kris Hamer, its Director of Insight, said: “The first half of the year is likely to challenging for households and retailers. Ongoing inflation will make sales appear to be rising, but we expect falling volumes as consumers continue to manage their spending. We also don’t see many signs at this stage of retailers’ input costs easing, with energy costs expected to rise by £7.5 billion as the government’s Energy Bill Relief Scheme comes to an end in March, putting ongoing upwards pressure on prices.
“There is cause for optimism in the second half of 2023, when we expect inflation to ease and improving consumer confidence to result in an improvement to sales growth, and corresponding volumes.”
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