UK shoppers spent more as temperatures rose in August, BRC survey shows

By Suban Abdulla

LONDON (Reuters) -British shoppers spent more in August, helped by summer weather and stronger demand for food, furniture and back-to-school computers - though some of the increase reflected higher food prices too, the British Retail Consortium said on Tuesday.

The BRC said spending at its members, mostly larger retail chains, increased by 3.1% in annual terms in August after a 2.5% rise in July.

On a like-for like basis - a measure which adjusts for changes in floorspace and is used by equity analysts - sales rose 3.1%, their fastest this year apart from a 7.0% jump in April due to the timing of Easter this year.

Food spending rose by 4.7% in August compared with a 1.8% increase for other goods.

"Stronger growth in food and drink was largely down to rising prices, which rose over 4% in August, rather than increasing volumes," BRC chief executive Helen Dickinson said.

Retailers were worried about consumer confidence and spending in the lead up to Christmas due to impact of the British government's budget, set to be delivered by finance minister Rachel Reeves on November 26, she added.

Consumer spending figures from Barclays - which cover a wider range of goods and services - showed spending growth slowed to 0.5% in August from 1.4% in July.

Spending on essentials dropped while discretionary spending increased by 2% - boosted in part by Netflix subscriptions to watch summer hit "KPop Demon Hunters", Barclays said.

Concerns about food prices in August rose after stronger-than-expected inflation data the month before, but consumers grew more confidence about Britain's economy after the Bank of England cut rates last month.

"However, 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. In our view, it will take further interest rate cuts to provide the economy with a sustained boost," Jack Meaning, Barclays' chief UK economist, said.

The BoE last month reduced borrowing costs to 4% from 4.25% in a narrow 5-4 split vote and after a rare second round of voting. It is widely expected to hold rates on September 18.

Official data showed inflation hit an 18-month high of 3.8% in July. But retail sales jumped by much more than expected, partly due to the women's European soccer championship.

(Reporting by Suban Abdulla)