Britain’s retail sales fell more than expected in July, as torrential rain and dry weather held back shoppers feeling the blow from rising inflation, triggering 14 consecutive rate hikes.
Official data showed that the volume of retail sales last month was 1.2 percent lower than in June. Economists polled by Reuters had expected a 0.5 percent decline.
Investors are assessing how much the drop in sales is a warning sign of a slowdown in Britain’s stagnant economy amid a weak pound sterling, and after the driest July 6 in records dating back to 1836.
“It was a particularly bad month for supermarkets as the summer drift coupled with the increased cost of living slowed sales of both clothing and food,” said Heather Bofill, deputy director of surveys and economic indicators at ONS, who also explained Sales of department stores and household goods have declined significantly.
The retail figures contrasted with stronger-than-expected reports of economic growth, wages and inflation last week.
And many shoppers headed online rather than venturing out in the rain with 27.4 percent of online retail sales, up from 26.0 percent in June and the highest since February 2022.
The sales volume of food stores decreased by 2.6 percent on a monthly basis, while the sales volume of non-food stores decreased by 1.7 percent.
The drop came on the heels of a strong June for retailers who were boosted by the heatwave.
In addition to the unpredictability of the weather in Britain, consumers have been hurt by high inflation, which hit around 7% last month, down from a peak of around 11% in October 2022 but still the highest among the world’s large affluent economies.
However, the July data marks only the second time that sales volume has declined on a monthly basis so far in 2023, indicating resilient consumer demand.
House prices in the UK are down by the most since 2009
The high interest
Some economists have said that the impact of the Bank of England’s steady rise in interest rates will inevitably hurt consumer spending in the second half of 2023.
Ruth Gregory, deputy chief economist at Capital Economics, said the drop in sales may have had more to do with the unusually wet weather than the impact of higher interest rates on consumer spending…but with the Bank of England still rising and consumer confidence waning, what’s going to happen? We remain pessimistic about the outlook for public spending this year.
Erin Brooks, European retail and consumer lead at Alvarez & Marsal, said: “Although inflation is slowing, food prices in particular have been stubbornly high, affecting both volumes and the willingness to spend in more categories. Consumer spending in non-essential categories is weak, however, reports indicate that travel bookings are on the rise due to the terrible weather.
She said last month’s slump could “become a trend” unless tourism spending in August or shopping for the new school year in September boost sales.
Market research firm GfK reported last month that consumer confidence fell in July for the first time since January.
But Samuel Toombs of Pantheon macroeconomics said accelerating wage growth and slowing inflation paint a more optimistic picture.
Data published this week showed basic wages growing at the fastest since records began in 2001, bad news for the BoE which is wary of persistently high inflation but helps consumers whose earnings are chasing price growth.
“Looking forward, we continue to expect real disposable income for households to rise rapidly,” Tombs said.
Despite a rainy July, Next and Mark & Spencer, two of Britain’s largest retailers, reported strong trading and raised their earnings forecasts for the month.
But the sector as a whole saw losers too. Last week, the 93-year-old home goods and home goods retailer Wilco collapsed with 400 stores, putting 12,500 jobs at risk.
The Office for National Statistics said retail sales volumes were 3.2 percent lower than a year earlier, compared with economists’ expectations for a 2.1 percent decline.
2023-08-18 10:57:05
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