UK retail sales rose in July, a sign of resilience as the sector navigates a complex economic landscape. The latest figures from the Office for National Statistics reveal that sales volumes increased by 0.6 per cent from June, surpassing economists’ expectations of a 0.2 per cent rise, largely driven by favourable weather and heightened consumer activity surrounding the women’s European soccer championship.
However, the annual growth rate has presented a more subdued picture, coming in at 1.1 per cent and reflecting a downward revision in previous months’ data. Notably, sales in the three months leading to July saw a decline of 0.6 per cent, indicating underlying challenges within the retail sector.
Retail sales: Revisions Cast Shadow on Growth Figures
The revisions to earlier data have raised eyebrows among economists, notably with June’s monthly growth rate being adjusted down from 0.9 per cent to just 0.3 per cent. Paul Dales, chief UK economist at Capital Economics, commented that these revisions render the retail sales figures “a bit softer than they look” and suggest that the July uptick may be attributed to one-off events rather than a sustained rebound.
The Office for National Statistics (ONS) faced scrutiny for its handling of data, particularly regarding seasonal adjustments that failed to adequately account for holidays like Easter, leading to significant corrections. The first-quarter retail sales growth was revised down to 0.7 per cent from 1.3 per cent, while second-quarter growth saw a slight rise to 0.3 per cent from 0.2 per cent.
Inflation Pressures and Economic Context
Consumer price inflation has ticked up to 3.8 per cent in July, with the Bank of England projecting it to reach 4 per cent in September. Despite this inflationary pressure, average wages are reportedly increasing at a pace that outstrips price rises, providing some relief to consumers.
As the UK prepares for the release of July’s gross domestic product data, economists anticipate a slowdown following a surprisingly robust first half of the year, aided by governmental spending. The ONS has indicated that the downward revision of first-quarter retail sales could lead to a slight adjustment in GDP growth figures.
Sector Performance and Consumer Trends
In July, a report from the British Retail Consortium highlighted a 2.5 per cent rise in spending among its members, primarily larger retail chains. This growth was attributed to increased purchases of food and summer apparel during the fifth-hottest July on record. Yet, when adjusted for rising prices—particularly in the food sector—this growth translates into a decline in actual purchase volumes.
In a reflection of current consumer behaviour, electricals retailer Currys (CURY.L) noted a 3 per cent increase in sales during the four months ending August, spurred by high temperatures prompting purchases of air conditioning units and fans. In contrast, data from the ONS indicated a 0.2 per cent decline in food purchases month-on-month and a 1.5 per cent drop in department store sales. Clothing and footwear sales, however, experienced a boost of 2.5 per cent, further underscoring the mixed trends within the sector.
