Retailers suffered a further blow in August as residents and visitors bought 1.4 percent less than the year before at the height of what is supposed to be a busy tourist season.

A high rate of inflation at 3.4 percent (the highest since 1991), increased spending on goods overseas and a fall in car and bike sales all pushed down the retail sales index volume for the month of August.

There was, however, good news for tourist-related sales, which rose 6.9 percent and clothes stores posted the strongest gains in any sector.

“It shows that there is still a lot to be done in the retail sector,” said George Grundmuller, head of the visitor retail sector of the Chamber of Commerce. “It is good to see tourist spending up in August and a rise in the apparel sector which has not been good recently.”

The plight of retailers had been looking up, with five out of six months in the first half of the year showing growth volume in this sector. But out of the last four months, three have now been in negative - May (-0.1), June (+1.5), July (-0.4) and August (-1.4).

Residents and tourists spent $42.5 million during August, while purchases declared by returning residents reached $5.52 million, a jump of 33.3 percent.

Consumers did actually spend more this August than last before factoring in the high inflation rate and spending was up 2.1 percent and up $0.8 million year on year, but the jump in inflation brought the real figures down.

“While I am pleased to see that tourist spending and apparel are up, overall I think there is cause for concern with high spending overseas and retailers need to focus on their ‘Buy Bermuda' campaign.”

He said the campaign was to kick off in the next few weeks to encourage residents to do their Christmas shopping on the Island.

Mr. Grundmuller said that the high rate of inflation was high, but it was difficult for him to comment on it as he did not know the specifics as to why it had risen so much.

He said: “3.4 percent is high, and it has to be seen if this is the establishment of a trend or if it is a one-off. But inflation has been edging up a bit recently.”

In a report on the retail sales index released by Government yesterday the Department of Statistics said that gross receipts for motor vehicles fell by 15.7 percent compared to the same period last year.

“Auto dealers reported that restrictions on size and features of vehicles imported resulting in a limited variety of available models was the primary cause of declining sales levels,” said the report.

However, sales in liquor stores were up by 5.6 percent due to an increase in the price of both beer and spirits and the service station sector also showed growth, of 1.9 percent after a general rise in the cost of gas at the fuel pump.

The total value of sales for building materials increased marginally, up 0.9 percent year-over-year. But the report said that this in part reflected sustained strength in retail sales for this sector and gross receipts in August, 2002 were abnormally higher than the same month for 2001.

The food store sector edged up 0.2 percent with mixed results reported across various stores surveyed.

Gross revenue in the “all other store type” rose by 8.4 percent compared to August, 2002. Big ticket items such as home appliances and computer equipment showed strong growth, up by 9.2 percent. The survey said that spending was fuelled by special promotions and the introduction of new product lines.

Apparel stores sector experienced the strongest growth in August, the report said. Sales promotions, the introduction of new products, enhanced sales techniques helped to push consumer spending up 9.6 percent year-over-year.