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Retail sales suffer after the riots

Online sales have risen as more young people shop on the internet but many high street stores are struggling to survive

Online retailers have survived a collapse in consumer confidence and unprecedented squeeze on family incomes to register a 13.7% growth rate over the last year, according to official figures.

Internet sales climbed above the £500m mark in August, providing the only bright spot in an otherwise gloomy picture of emptying high streets and cost-conscious consumers.

Fashion retailer Next said this week that the success of its online Directory business had kept the firm from showing a sharp decline in sales, while Boden, the online-only clothing retailer, recorded record profits.

The Centre for Economics and Business Research (CEBR) said online sales accelerated to £536m from £383m last August, with a growing number of purchases through mobile phones and the increased use of the internet for purchases among young people.

“Just under half of the population have access to the internet via mobile, while around 90% of 25-34 year olds have made internet purchases over the last year – which compares with the national average of around 66%,” it said.

Across the sector, retail sales fell 0.2% in August to leave sales volumes unchanged over the past year.

While the numbers were modestly better than expected, economists said the outlook for stores was bleak and – combined with a run of gloomy data for the manufacturing and services sectors – would raise pressure on the Bank of England to start a second round of asset purchases to boost growth.

The Office for National Statistics (ONS) said “non-food stores” provided much of the downward impetus in August.

Electrical goods and furniture retailers have suffered in particular in recent months as consumer spending was hit, with separate news that sales at electricals chain Comet were down 22% in the three months to the end of July.

The value of sales increased over the year by 4.7%, though this was accounted for almost entirely by inflation.

David Birne, an insolvency partner at accountants HW Fisher, said: “The spasm of looting which briefly convulsed several British cities at the start of August had led many to fear the worst from these figures.

“In the event, the value of retail sales in August was the same as the July figure, though the volume of sales fell marginally. There is some hope for online retailers, but many smaller high street shops are really battling to make ends meet.”

Chris Williamson at financial information company Markit said there were worrying signs that consumers were spending their savings and adding to debts to maintain spending in the face of rising inflation.

He said: “It looks like the British consumer remains addicted to spending and not concerned at the wider problems faced by the economy.

“That said, they are trading down and shunning the luxury food items in favour of basic ranges. So shops might be selling a similar volume to last year but it is lower margin and will likely hit profits.”

Rising inflation and the threat of redundancies as a result of hefty public spending cuts have depressed consumer morale to its weakest since Britain was in the depths of recession.

Data on Wednesday showed that unemployment in Britain rose at its fastest pace in two years, fuelled by record job losses in the public sector.

“It is inflation that is killing the growth numbers,” said RBS economist Ross Walker. “I don’t think you are going to see a recovery in volumes and therefore real household consumption growth until inflation is back down.”

Britons’ inflation expectations for the next year rose to their highest level in three years, a separate Bank of England survey showed on Thursday.

The Bank’s August inflation attitudes survey said average public inflation expectations for the next 12 months rose to 4.2% compared with 3.9% in the May poll. © 2011 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds