UK Sept retail sales beat forecasts, 17% fuel jump highlights squeeze

For sterling and gilts, these figures alone do little to alter the outlook, but they have a stagflationary tone — household spending on fuel is rising while discretionary category volumes remain weak. The roughly 17% increase in fuel expenditure demonstrates how oil and diesel price rises are burdening household budgets, maintaining the risk of higher UK inflation despite soft underlying demand. For retailers in Britain, sluggish non-food sales and cutbacks in non-essential purchases indicate a cautious approach as the vital Christmas season approaches. The upcoming budget on 28 October provides the next trigger, and any tax increases may further restrain discretionary spending.

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In September, British consumers did increase their spending slightly, but most of it went on petrol and at drinking establishments, rather than on the high street.

In summary:

• BRC like-for-like sales increased 1.0% annually in September, surpassing the 0.7% forecast and accelerating from August's 0.5% pace. Total sales climbed 1.3%, staying below the 1.5% 12-month average.
• Food sales advanced 2.5%, while non-food gained a mere 0.3%. The health and beauty category enjoyed its strongest month of 2024, but clothing and footwear suffered due to unseasonably mild weather.
• Barclays card spending growth edged down to 2.0% from 2.1%. Essential spending rose 2.5%, driven by a roughly 17% surge in fuel purchases as diesel reached all-time highs.
• Expenditure in bars, pubs, and clubs increased almost 4%, marking a fourth consecutive monthly rise, supported by summer heat persisting through much of September.
• Barclays' measure of household financial confidence reached a seven-month peak of 67%, yet 68% of consumers worry about the 28 October budget and 30% are reducing non-essential spending.

British retail sales growth accelerated beyond expectations in September, but the details from two Tuesday consumer surveys indicate that households are mostly paying higher prices rather than increasing their spending, as record diesel costs consume an ever-larger portion of budgets.

According to the British Retail Consortium, like-for-like sales (excluding store space changes) increased 1.0% year-on-year, outperforming the 0.7% prediction and doubling the 0.5% rate in August. Total sales were 1.3% higher, improving from August's 0.7% but remaining under the 1.5% 12-month average. The BRC's data tracks sales value, not volume, meaning increases incorporate price changes.

The category breakdown is revealing. Food sales grew 2.5%, while non-food saw minimal change at 0.3% growth. Health and beauty enjoyed its top-performing month of the year, and toys benefited from items tied to Pokemon's 30th anniversary. Clothing and footwear performed poorly due to unusually warm weather pushing back the autumn wardrobe transition. BRC chief executive Helen Dickinson stated that households are staying cautious with expected bill and tax hikes on the horizon.

A separate Barclays survey using card spending data indicated annual growth edged down to 2.0% from 2.1%. Essential expenditure increased 2.5%, propelled by about 17% growth in fuel outlays as diesel prices set record highs, highlighting how the worldwide energy shock impacts household budgets. Non-essential spending climbed 1.8%. The warm conditions benefited hospitality, as outlays in bars, pubs, and clubs rose almost 4% for the fourth month in a row.

Consumer confidence offers conflicting indicators. Barclays reported that household financial confidence reached 67%, the highest in seven months. However, 68% of consumers expressed concern about the impact of finance minister John Healey's 28 October budget, and 30% stated they are reducing non-essential purchases.

The two surveys cover different time frames, which accounts for their seemingly contradictory movements. The BRC data spans 30 August to 3 October, encompassing early autumn, while the Barclays figures range from 22 August to 24 September.

As fuel expenses erode disposable income and the budget approaches in weeks, the coming months will assess whether better confidence leads to spending beyond necessities, especially as retailers enter the vital Christmas season.