Sales up, but consumers still 'uncertain'

Retail sales rose slightly in May compared to the same time in 2009 - though customers are still beset with uncertainty, according to latest industry figures.

The latest Retail Sales Monitor found that like-for-like sales - which strip out any impact from stores that have opened or closed over the last 12 months - had risen by 0.8% last month versus 2009, while overall sales had grown by 3.0%.

Sectors which performed well included clothing and footwear, while outdoor DIY and leisure also benefited from the onset of summer.

The monthly report is produced by the British Retail Consortium (BRC) and professional services provider KPMG. BRC director-general Stephen Robertson acknowledged the boost to sales that the sunnier second half of May had brought, and pointed to the lift anticipated from the effect of the World Cup.

However, he warned that 2010 was in good shape only when compared to a bad 2009, stressing that consumers were still anxious and were seeking clarity from the Government. This has been holding them back from spending large amounts of money on big-ticket purchases, Robertson said.

"Consumer confidence has clearly improved since last year's lows," he added.

"But there's still plenty of uncertainty, which is making customers nervous about buying expensive goods, such as furniture, despite widespread reductions."

Helen Dickinson, KPMG head of retail, agreed that while the General Election did not seem to have had an impact on May's sales, the upcoming 'Emergency Budget' on 22 June could be more pivotal to retailers. She too highlighted the "reluctance of consumers to commit to big-ticket purchases while uncertainty over the future looms."

Meanwhile, non-food, non-store sales - including internet and mail order purchases - were almost 22% higher than last year. While Robertson acknowledged this as "excellent sales growth" - particularly fuelled by a boom in pre-World Cup television promotions - he pointed out that the figures needed to be viewed in the context of poor growth in 2009.

Another BRC measure - the Shop Price Index, produced with Nielsen - showed that overall shop price inflation had slowed to 1.8% in May, down from 2.0% the previous month.

Out of service

Consumer caution has also led to a disappointing time for the service industry over the last three months, according to the Confederation of British Industry (CBI).

The business group's Services Sector Survey, which is carried out every quarter, looked at 151 firms from the business and professional service sectors - such as accounting firms - and consumer services, such as the hotel industry.

While 14% of these consumer services said that business volume rose over the last three months, 35% said it fell, leading to a balance of -21%. When it came to the value of sales, the net balance was -5%.

Overall profitability was at its the lowest ebb since August last year, with a balance of -34% of firms saying that they were profitable in the second quarter.

These figures followed a slight improvement in the first quarter, which had given rise to optimism.

CBI chief economic adviser Ian McCafferty, said: "These figures for the UK service sector show there is some way to go before the recovery gets up to speed.

"Consumers are still being cautious about spending on discretionary activities like eating out in restaurants or bars, and leisure and personal services, such as haircuts or beauty."

IMAGE AP Photo/Manish Swarup

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