British retailers continue to suffer the consequences of a difficult summer, as gloomy weather and rising interest rates dampened consumer spending in July. The latest monthly report from the British Retail Consortium and consultancy KPMG showed substantial year-on-year falls in sales volumes and a growing trend of retailers turning to promotions to win over cautious consumers.

Esme Harwood, director at Barclays, noted the different impacts of July's weather on different sectors. Clothing retailers faced problems as the washout conditions hit them hard, but takeaways and streaming services recorded unexpected growth. The entertainment sector also benefited thanks to advance sales for stadium tours by Taylor Swift and the Foo Fighters.

Significantly, amid concerns for value for money, consumers are also picking up signs of drinkflation," where alcoholic drinks suffer from shrinkflation. This could be linked to manufacturers adjusting their products ahead of recent changes to alcohol duty calculations.

Barclays said that the proportion of shoppers noticing shrinkflation increased from June to July, with chocolate, crisps, and biscuits being the most frequently affected products. A fifth of those who noticed shrinkflation say they are switching to brands that haven't altered their product sizes.

The shift away from online shopping continued, with non-food sales via online channels dropping to their lowest level since the pandemic began over three years ago. The proportion decreased from 35.3% in July 2022 to 34.7% last month despite over a third of non-food sales occurring online, it said.

The BRC/KPMG and Barclays reports suggested that there was a slight increase in spending values in July. However, after taking into account the current inflation rate of 7.9%, actual spending power shrank. The retailers are trying to attract customers with all kinds of promotions, which caution-prone, price-conscious consumers have not abandoned yet amid high inflation and rising interest rates.