Industry Sector Weekly by Lloyds TSB

Despite some recent optimism around UK retail sales over the summer, August month-on-month sales figures disappointed market expectations, falling 0.5% from July compared to a 0.3% expected increase. UK retail sales fall in August

Despite some recent optimism around UK retail sales over the summer, August month-on-month sales figures disappointed market expectations, falling 0.5% from July compared to a 0.3% expected increase. On the year, sales rose 0.4% for the month, the smallest increase since April. Moreover, July figures were revised downwards, from 1.1% to 0.8% on the prior month. These results dovetail with trading statements released this week from Next and Debenhams, both cautious about the outlook for retail sales in the near future, therefore placing greater emphasis on gross margin improvements and managing inventory levels. Looking at BRC shop price data and implied price deflators from official data in tandem imply greater discounting in order to drive volume growth in sales, especially for the non-food segment. Discounting activity appears to be heaviest in the clothing and electrical goods markets.

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