Retail sales rise 3.1% in August as retailers brace for crucial 'golden quarter'

Retail sales momentum held in August as shoppers were buoyed by the hottest summer on record and an interest rate cut, but retailers are bracing for a testing fourth quarter with a late autumn Budget looming just days before Black Friday.

Total retail sales rose 3.1% in August, the British Retail Consortium said, a year-on-year increase that compares with 1% growth in the same month last year and sits above the 12-month average of 2%. Food sales were a particular driver, increasing 4.7% year-on-year, while non-food sales grew by 1.8% after a decline a year earlier.

Helen Dickinson, chief executive of the BRC, said retailers were watching the run-up to Christmas anxiously after the Chancellor set the Budget for 26 November. "With the later-than-expected Budget falling just days before Black Friday, many are uneasy about how consumer confidence and spending could be impacted by tax rise speculation in the run-up to Christmas," she said.

The rise in food sales was driven more by price than volume: food price inflation rose sharply over the summer, with staples such as beef, chocolate and coffee among the items pushing prices higher. Food price inflation reached 4.9% in July, and the BRC said food inflation was up more than 4% over the month.

Separate data from Barclays showed a more muted picture of card spending in August, with consumer card spending up 0.5% year-on-year compared with 1.4% growth in July. Barclays reported that essential spending fell, while discretionary spending rose 2%, helped by stronger sales in clothing, furniture and health and beauty stores.

"The outlook for the rest of the year remains subdued, particularly as Budget speculation is likely to add to uncertainty for both households and businesses," Jack Meaning, chief UK economist at Barclays, said. "In our view, it will take further interest rate cuts to provide the economy with a sustained boost."

Shopper confidence fell for the third consecutive month to minus one, the BRC reported, and the Institute of Grocery Distribution highlighted broader pressures on households. Sarah Bradbury, IGD chief executive, said the "emotional weight" of rising energy bills and fears of tax hikes were adding strain, particularly as unemployment ticked upward.

Non-food categories showed pockets of strength. The BRC noted monthly increases in home goods sales since a spike in property transactions earlier in the spring, attributed to activity before Stamp Duty changes that took effect in April. Retailers specialising in discretionary categories benefited from a summer of warmer weather, which supported high-street footfall and seasonal spending.

Retailers' hopes that summer momentum would carry into the so-called "golden quarter"—the period from October through December that includes key trading events such as Black Friday and the Christmas shopping season—are tempered by calendar and policy risks. The unusually late timing of the Budget could compress the window for certainty on tax and spending measures ahead of the busiest retail weeks.

Analysts caution that while a combination of summer weather and an interest rate cut has lifted some spending, underlying pressures such as elevated food inflation and cautious consumer sentiment could restrain sales growth in the months ahead. Many retailers have highlighted the importance of sustained consumer confidence to maintain the healthier sales trajectory seen in August.

Retailers now face a key calendar and economic test: converting the summer's boost into robust holiday trading without the drag of heightened policy uncertainty. Industry executives and economists say they will be watching consumer spending data, inflation readings and any signals from the Budget closely as the sector prepares for the critical final quarter of the year.