Retail sales sink again as shortages hit department stores - live updates

© David Cliff/NurPhoto /Getty Images Contributor Shoppers ride up an escalator in a department store in London  – David Cliff/NurPhoto /Getty Images Contributor 

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07:58 AM

CMA to investigate Pennon’s Bristol Water acquisition

Britain’s competition watchdog said today it will investigate whether utility company Pennon’s plans to buy Bristol Water could reduce competition in the water industry.

Competition and Markets Authority (CMA) officials will examine the deal to understand if it might result in a “substantial lessening of competition within any market or markets in the United Kingdom for goods or services”.

The regulator will also assess whether the deal “is likely to prejudice [the water regulator] Ofwat’s ability, in carrying out its functions, to make comparisons between water enterprises”.

07:42 AM

FTSE risers and fallers 

Alongside BA owner IAG, other top risers on the FTSE 100 this morning include InterContinental Hotels Group (up 2.6pc) and publishing and events group Informa (up 2.4pc). 

Miners dragged, with Anglo American leading losses (down 3.3pc). 

Among the mid-caps, Wickes was leading gains (up 4.8pc) on the FTSE 250 index, after publishing strong results yesterday. 

Airline TUI was close behind (up 3.8pc) with Virgin Money also among top risers (up 3.2pc). 

Review website Trustpilot was trailing, down 4.3pc. 

07:29 AM

BA owner rises ahead of travel rule changes

British Airways owner IAG is leading gains on the FTSE 100 in early trading today, in anticipation that the government will announce plans to scrap PCR tests for vaccinated travellers and simplify the current “traffic light” travel system. 

The airline is up 3.4pc this morning, following suggestions that ministers could suggest the amber travel list could be removed entirely and dozens of countries could be taken off the red list.

Tui is also up 2.8pc, Wizz Air is up 1pc and Easyjet has lifted 0.8pc. 

07:14 AM

Shortages hit department, clothing and food stores

Shortages weighed on the latest retail sales figures, with almost one-fifth of department stores unable to get the materials, goods or services they needed and food stores forced to switch suppliers to get what they needed. 

More than 18pc of department stores suffered from shortages in August, followed by 11pc of clothing services, the Office of National Statistics said today. 

Meanwhile, more than 22pc of food stores had to change suppliers or find alternative solutions in order to get what they needed. 

“Shoppers and shops were stymied by shortages in August, ” said Sarah Coles, personal finance analyst at Hargreaves Lansdown.

“Keeping the shelves full was a real battle, especially for department stores, which is one reason why we spent less in these stores in August. Supermarkets had a fight on their hands to keep supply chains flowing, but the might of these retailers meant they were able to track down alternative suppliers so we could keep filling our trolleys.”

07:03 AM

FTSE 100 jumps 0.8pc higher

The FTSE 100 has jumped 0.8pc on opening to 7,082.87 points. 

The FTSE 250 has also lifted 0.3pc to 23,713.79 points. 

07:02 AM

‘Near-term outlook for households’ spending is overcast’

Although retails sales were still were 4.6pc above their February 2020 level and the decline in food store sales was likely a consequence of more people visiting restaurants, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, sees the near-term outlook as overcast. 

He says: 

So far, households’ spending appears to have been no stronger in September. The BoE’s CHAPS data show that the non-seasonally adjusted value of credit and debit card transactions was 5.4pc below its February 2020 level in the seven days to September 9, compared to 3.1pc below in the seven days to August 9.

In addition, Google’s mobility data show that the number of people visiting retail and recreation locations in the first 11 days of September was 7.5pc below its January 2020 level, slightly exceeding August’s 6pc shortfall.

[…] The near-term outlook for households’ spending is overcast. Households’ real disposable incomes will decline in Q4 as CPI inflation soars to about 4pc, labour income drops in the wake of the closure of the furlough scheme, and the £20 per week uplift to Universal Credit is withdrawn. In addition, the 1.25pp increase in the rate of employees’ NICs in April will hit disposable incomes by about 1pc, while the income tax threshold freeze will impose an additional modest drag.

At the same time, still-high levels of Covid-19 circulation likely will ensure that some households remain cautious about spending money on indoor services. Accordingly, we continue to think that households’ spending will take until Q3 2022 to return to its pre-Covid peak. 

06:46 AM

Retail sales: ‘This is the new normal’ 

Oliver Vernon-Harcourt, head of retail at Deloitte, says:

Many businesses talk about ‘waiting for the new normal’, but the reality is that consumer behaviours have now steadied, and this is the new normal. 

In August, online purchases accounted for 27.7pc of all retail sales, compared to nearly 20pc pre-pandemic. As a result, retailers are wrestling with the conundrum of where to invest and where to allocate capital, whether in-store or online.

Many retailers are also experimenting with new ways to improve the consumer experience and remain attractive to, for example, the more conscious consumer, including zero waste trials and hybrid shopping. A perfect storm of labour shortages, supply chain issues and increased demand will continue to test retail leaders as we enter the Golden Quarter.

Christmas will be impacted by these headwinds; there will very likely be shortages in some categories which will force consumers to make different choices. Retailers – particularly grocers – will have to decide which products to put on the shelves, prioritising higher-margin products where possible. 

06:40 AM

Clothing and fuel defy retail sales slide

© Jason Alden /Bloomberg A shopper holds bags from the Selfridges & Co. Ltd. department store on Oxford Street in central London – Jason Alden /Bloomberg

Paul Dales, chief UK economist at Capital Economics, adds:

Coming on the back of a 2.8pc m/m drop in July (revised from -2.5pc), retail sales have fallen by 3.8pc in two months and are now just 4.5pc above the pre-pandemic peak after having been 10.1pc above it in April.

This probably isn’t as gloomy a sign for the overall economic recovery as it may seem as at least some of it reflects households shifting their spending to elsewhere after the lockdowns.

Indeed, the 1.2pc m/m fall in food sales may be because people are eating less at home and more in cafes, pubs and restaurants. And the 1.7pc m/m decline in online sales suggests people are shopping less from home on their phone, tablets and laptops.

At the same time, the 1.5pc m/m rise in fuel sales was the sixth rise in a row as people travelled more. Clothing was the only other area where sales rose, by 0.7pc m/m perhaps as people ditched the hoodies and bought new shirts for the return to the office.

06:31 AM

Expert reaction: ‘Trade headwinds likely to intensify’ 

Hussain Mehdi, macro and investment strategist at HSBC Asset Management, says: 

August activity was expected to rebound from July’s sharp pullback, driven by one-off factors such as bad weather, the end of the Euro 2020 tournament, and the impact of the “pingdemic”.

The disappointment reflects sales volumes already back at pre-covid levels, a switch into services spending over the summer as the economy re-opened, and ongoing supply disruptions.

These factors are likely to prove a meaningful constraint to sales growth in the coming months, while next April’s hike in national insurance contributions will also be a headwind.

Positively, however, robust consumer confidence and high savings piles should continue to underpin overall consumer activity.

Aled Patchett, head of retail and consumer goods at Lloyds Bank, comments:

Pent up demand and lockdown savings may have sustained growth this summer, but this latest set of figures indicates that supply chain issues and weakening consumer demand are beginning to bite.

Worryingly, those trade headwinds are only likely to intensify as we head into autumn, with product limitations potentially restricting sales volumes during the critical golden quarter. Many big retailers have already issued warnings in relation to their ability to get the right products on shelves, while the UK’s Covid-fuelled appetite for online fulfilment will be tested in the run up to Christmas if current driver recruitment issues aren’t addressed.

“With the government also mooting the reintroduction of certain Covid restrictions this week, the coming months make for a heady mix of complex challenges that retailers have planned for but hoped were behind them.”

06:24 AM

‘Shortages also weighed on sales’

Here’s some snap reaction from Lynda Petherick, head of retail at Accenture:

After July’s sharp dip, August was another underwhelming month for retail sales as macro issues put a dent in consumer spending.

The easing of self-isolation rules, summer staycations and further easing of hospitality restrictions helped maintain a healthy level of consumer spending. However, the continued impact of labour shortages and supply chain disruption weighed heavy on the sector, in a month that was characterised by images of bare shop shelves and delayed deliveries.

Retailers will already be concerned as we head into the Golden Quarter as the horse may have bolted for businesses who haven’t already acted to sure-up their supply chains. Order fulfilment and securing stock will be challenging, while many brands could find themselves short-staffed over this busy time. Without meticulous planning, consumers may be forced to get creative this Christmas if retailers can’t meet their needs.

06:21 AM

Retail sales post surprise fall as Brits return to restaurants

Good morning.

Retail sales fell to a surprise 0.9pc slump in August, as Britons spent less in shops in favour of returning to restaurants and pubs following the end of lockdown.

Economists had expected to see a monthly increase of 0.7pc last month after July’s 2.8pc drop, but food store sales shrank 1.2pc while non-food retail sales declined 1pc following further easing of hospitality restrictions.

Department store sales plunged 3.7pc while sports equipment sales and computer sales fell 1.2pc, the Office for National Statistics said.

Jonathan Athow, deputy national statistician for the ONS, said: “Sales fell again in August, though not nearly as much as in July and, overall, remained above their pre-pandemic level.

“Other data suggest that the drop in food stores’ sales is linked to an increase in eating out following the lifting of coronavirus restrictions.”

5 things to start your day 

1) Piers Morgan signs up for Rupert Murdoch’s new channel TalkTV: Rupert Murdoch has signed up Piers Morgan and will launch a new TV network to challenge the BBC and GB News in a move likely to further inflame Britain’s culture wars. 

News UK said TalkTV would offer hourly news bulletins on current affairs, sports and entertainment from its journalists as well as “exceptional new talent”. 

2) Scotland faces £8.5bn black hole after independence vote: An independent Scotland faces painful austerity and currency attacks as it struggles to fill an £8.5bn financial black hole, a leading think tank has warned.  

In a blow for Nicola Sturgeon’s bid to break with Westminster, the Institute for Government (IFG) warned Scotland would struggle to borrow the sums it needed to address a deficit worth 8pc of its economy even before the pandemic struck.

3) Brexit red tape bonfire to scrap paper driving licences and share certificates: Physical driving licences face the axe and farmers may be allowed to spray pesticides from drones as part of a package of post-Brexit regulatory reforms.

A string of policies ranging from reintroducing pounds and ounces in the shops to scrapping paper share certificates were unveiled by Lord Frost as he pledged that UK would seize the opportunities of leaving the European Union. 

4) Australian submarine deal boosts Ultra Electronics takeover prospects: A new security pact between Britain, America and Australia has weakened the rationale for blocking the US private equity takeover of Ultra Electronics, which supplies kit for Britain’s nuclear submarines, experts have said.

Advent International’s pursuit of Ultra is thought to be more likely to succeed after the three countries agreed to share sensitive data under the so-called Aukus agreement.

5) Oracle pumps £150m into Oxford Nanopore float: Oracle will invest £150m in a British biotech company tracking Covid mutations in its upcoming London float.

The $240bn (£175bn) Texas-based software giant, founded by Larry Ellison, will become a cornerstone investor in Oxford Nanopore, which is set to go public next month.

What happened overnight 

Asian shares steadied on Friday after losses earlier in the week, but China jitters and global growth concerns weighed on investors’ minds, while the dollar sat near a three-week high.

European shares also looked set to rise on opening with pan-region Euro Stoxx 50 futures up 0.61% and FTSE futures 0.41% higher.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.12% on Friday but was set to finish down 2.7% on the week, which would be its worst week in four.

“We’re looking at a market that is nervous, though hasn’t seen sentiment turn outright bearish,” said Kyle Rodda, an analyst at IG markets.

“If you look for catalysts that could justify the next move to the upside in equities and risk assets, they are nowhere to be seen because global growth concerns are keeping investors on edge.”

Hong Kong’s Hang Seng Index rose 0.23% with traders looking for oversold stocks after the benchmark posted its lowest close in 10 months the day before, as the saga around China Evergrande Group lurched towards a conclusion

Coming up today

  • Corporate: WANdisco (interim)
  • Economics: Retail sales (UK); consumer prices index (EU)
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