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Consumer caution in August with only small rise on high street and new car sales slide 8 September 2010
Zoe Wood and Graeme Wearden (about the author)

Anxiety about looming job cuts and tax rises is making consumers wary of overstretching themselves, with official figures for August showing a sharp decline in new car sales.

The British Retail Consortium (BRC) said UK retail sales increased 1% on a like-for-like basis during August – compared with a 0.1% decline in the same month a year ago. Separately, the Society of Motor Manufacturers and Traders (SMMT) reported that 55,305 new cars were registered last month, 17.5% fewer than the previous year when consumers were able to claim a £2,000 discount by scrapping an old model.

Stephen Robertson, the BRC's director general, was cautious about the improving trend seen on the high street as he said retailers had resorted to discounting to win sales. "These results are a slight improvement on last month but this better growth is compared with a very poor performance a year ago and sales were often deal-driven," he said. In July, like-for-like sales increased 0.5%.

The BRC also said clothing and footwear sales had been boosted by the back-to-school rush for new uniforms as well as the arrival of cooler autumn weather.

However, the rate of food sales growth slowed while demand in the furniture and flooring sectors was weak as uncertainty returned to the housing market. "The good news is sales are still growing but anxiety about job cuts and tax rises is putting people off making major spending commitments," Robertson said.

Car sales fall for second month

The car industry is also being weaned off the scrappage scheme that boosted demand during the recession. This is the second month in a row that sales have fallen compared with a year ago. Although August is traditionally a quiet month on the forecourt, the poor figures raised fears of another slump in September, a crucial time for dealers as new number plates are issued.

Howard Archer, an economist at IHS Global Insight, said today's figures "do not bode that well" for car sales this month, with consumers reluctant to buy a "big-ticket" item such as a car in the current financial climate.

"The substantial fiscal squeeze will increasingly hit public-sector jobs and consumers' pockets, while households already face high unemployment, muted earnings growth, elevated debt levels and high fuel prices," Archer said.

Steven Jackson of beatmydebt.com is not surprised by the figures. "Buying a new car is arguably the second most expensive purchase any family will make. The fact is that with the government cuts starting to bite people are worried about their jobs and how they will afford to pay their current bills" he said.

"People with cash are trying to hold on to it and people without simply can not get credit to finance expensive purchases such as a new car" Jackson added.

The SMMT agreed that the ending of the £400m scrappage scheme this year meant car sales would be lower year on year for the rest of 2010. Paul Everitt, its chief executive, predicted sales would be down 10% this month compared with September 2009, when 367,929 new models were sold, a rise of 11.3% on 2008.

The SMMT estimates that just over 2m new cars will be sold during 2010, which would be a 1.2% increase on 2009 after very strong sales at the start of this year.

Source: The Guardian