According to official figures released on Friday, UK retail sales saw an unexpected rise in July. This increase was primarily driven by enticing online shopping deals. However, it was noted that fashion sales declined during this period. The overall sales volumes are expected to continue declining as households face the highest inflation in 40 years.
In July, retail sales volumes, adjusted for inflation and seasonal variations, increased by 0.3% compared to the previous month, marking the first increase in three months. This was contrary to economists’ expectations of a 0.2% drop. However, over the three months leading up to July, sales fell by 1.2%, and they were 3.4% lower compared to the same period the previous year, aligning with forecasts.
The growth in sales was mainly driven by a significant surge of 4.8% in online and mail order volumes, the largest monthly increase since December. The annual Prime Day promotion by Amazon, known for boosting retail sales in previous years, contributed to this increase. The Office for National Statistics (ONS) also highlighted higher spending from other online retailers, especially those selling household goods. However, food volumes only saw a minor increase of 0.1%, following a boost in June due to celebrations for Queen Elizabeth’s Jubilee. Conversely, clothing sales declined by 1.2%, and the ONS attributed a 0.9% decrease in fuel purchases to the exceptional hot weather, resulting in reduced driving.
Despite the positive monthly growth in retail sales, the ONS stressed the overall downward trend in sales. The Bank of England has also issued a warning, stating that high inflation is likely to push the UK into a recession later this year. With inflation at its highest since 1982, households are facing increased living costs, including rising food prices and energy bills. A GfK consumer survey revealed that households are feeling “exasperated” by the surging cost of living, and consumer sentiment is reportedly the weakest it has been since 1974.
As a result of these economic challenges, supermarkets have noticed a shift in consumer behavior, with shoppers opting for cheaper products. Frozen food chain Iceland recently announced that it would provide interest-free loans of up to £100 to its poorest customers. Industry analysts predict that average annual energy bills will exceed £4,000 by January 2023, up from approximately £1,000 a year ago.
Overall, while UK retail sales experienced an unexpected increase in July, the outlook for retailers remains uncertain due to the squeeze on shoppers’ spending power caused by high inflation and low consumer sentiment.
Helpful links:
– Office for National Statistics (ONS) – Retail Sales report
– BBC News – “UK retail sales rise in July but food stalls”
