Retail demand to stay buoyant due to lockdown savings and BNPL - report

By

Nigel TAYLOR

Published
Apr 21, 2022

Thank goodness for lockdown savings and buy-now-pay-later services. It appears both will be key in consumers maintaining their spending habits despite increased pressure on household budgets, according to a Capital Economics report.

Consumer demand will not see a significant drop in the coming months despite tightening finances across the country, according to its economists.

Evidence showed households were turning to credit to “tide them over,” Ruth Gregory, senior UK economist at Capital Economics, told City AM, pointing to a £1.9 billion jump in consumer credit in February.

She added: “In the months ahead, some of the squeeze on households’ real incomes will be dulled by employment and earnings rising further.” She also noted there was “scope for consumer spending to continue to rise as real incomes fall.

“Clearly, though, the longer the drag on households’ real incomes lasts, the more likely it is that households change their spending behaviour,” she added.

It comes as the health of the retail sector is anticipated to decline in the next few months as firms face “a barrage of costs”, according to KPMG/Ipsos Retail Think Tank (RTT) members. 

“Clouds are on the horizon for more muted health” for the sector in coming months, according to KPMG’s head of retail, Paul Martin. 

It cited conflict in Ukraine and lockdown in China expected to result in accelerating food prices, with higher fertiliser costs and wholesale food prices, Martin added.

Reported sales growth over the first three months of 2022 was stronger than expected, according to RTT members.

Robust consumer demand saw the Retail Health Index flat at 75 points in the first quarter, equal to the last pre-pandemic quarter.

Footfall to bricks-and-mortar retailers was on the up, Martin added, “despite the headlines,” with shoppers wanting to treat themselves after two years of Covid rules.