Retail sales rise but price rises cast shadow over "welcome" growth

 
Jasper Jolly
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Spending on essentials rose more quickly than discretionary, according to Barclaycard (Source: Getty)

Retail sales last month provided a “welcome” second consecutive boost for retailers and the economy, although rising prices took some of the shine off the figures published today.

Like-for-like sales rose by 1.9 per cent year-on-year in September, the the British Retail Consortium (BRC) said, but the group warned that price rises were an important contributing factor.

Helen Dickinson, BRC chief executive, said: “Looking beneath the surface, we see that much of this growth is being driven by price increases filtering through, particularly in food and clothing, which were the highest performing product categories for the month.”

Large retailers have tried to absorb most of the effect of the devaluation of sterling since the EU referendum in June 2016, with fierce competition from rivals battling for market share, but price rises have forced inflation.

Read more: Consumer spending fell again in September

“With a potent mix of more expensive imports and increasing business costs from various government policies, something had to give at some point," said Dickinson

Separate figures from Barclaycard, which has sight of nearly half the UK’s credit and debit card transactions, show that spending on essentials rose by 3.8 per cent year-on-year in September.

That easily outstripped discretionary spending growth, at 2.8 per cent, meaning consumers are being forced to spend proportionally more on essential items as prices rise.

Paul Lockstone, managing director at Barclaycard, said: “Rising prices are undoubtedly having an impact on shoppers’ spending priorities, with more of the budget devoted to everyday essentials.”

Consumer spending was one of the key factors driving growth in the UK economy in the latter half of 2016 and the start of this year. However, rising inflation, which reached 2.9 per cent annually in August, has dragged back on consumers ability to spend as wage growth has lagged behind.

Read more: DEBATE: Is Mark Carney right to say we are not in a consumer debt bubble?

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