London 2012 dented retail sales - MyFinances.co.uk

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London 2012 dented retail sales

The British Retail Consortium says that retail sales fell by 0.4 per cent in August as the feelgood factor from the London Olympics failed to inspire consumers to spend.

Official data shows that retail sales increased by 0.3 per cent month-on-month but that the London Olympic Games gave no major boost to consumer spending in July.

Thursday, 20 September 2012 11:52

Retail sales declined in August as the nation tuned into the biggest sporting spectacle to ever hit the UK, the London 2012 Olympics.

Sales volumes fell by 0.2 per cent in August, contributing to an annual rise of 2.7 per cent, according to official figures from the Office for National Statistics (ONS).

The monthly drop in sales was less than analysts expected with the median prediction being of a 0.4 per cent monthly drop.

However, the drop in sales sounds the death knell to the view that the Olympics would provide a short-term boost to the economy.

Howard Archer, from forecasters IHS Global Insight said: "The August retail sales indicate that for all its many virtues, the Olympic Games appears to have hindered rather than helped retail sales.”

It provided a short-term boost to jobs and the fact that the ticket sales (that were bought some time ago) will be accounted for in the third quarter may help GDP, but the London Olympic Games were so compelling they stopped people going out shopping.

Anecdotal evidence showed that the warning of travel disruption in London during the Olympics discouraged shoppers and also workers from travelling into the capital with a subsequent negative impact on trade.

They even stopped people staying in and shopping according to the ONS data. Online sales figures had their worst monthly performance for more than five years as people tuned into the sporting action rather than go shopping online.

Online sales fell by 6.7 per cent compared to July – the biggest monthly decline since December 2007.

Commentary from the ONS said: "Feedback from online retailers suggests that sales were lower as consumers watched the Olympics instead of shopping online.”

However, there was a boost to sales from the overall impact of the sporting summer with retailers reporting a rise in sales of sports equipment, football shirts and other sporting goods.

On a quarterly basis retail sales rose by 0.6 per cent between June and August compared to the previous three months.

UK consumers have faced the worst squeeze on disposable income since the great depression of the 1930’s as inflation has outpaced wage increases for the last three years, energy prices have increased by 60 per cent in the last five years and petrol prices have hit a new record high.

According to Mr Archer, this is unlikely to ease.  He said: Hopes that the squeeze on consumers’ purchasing power would ease markedly further over the latter months of 2012 are waning.

"In particular, a move back up in petrol prices, rising utility bills and the possibility of higher food prices (partly due to the drought in the US) will limit any further falls in consumer price inflation in the near term and could even see it move back up.”