UK retail sales continue steady, if unspectacular, improvement in July

(Alliance News) - Sporting events and a more favourable economic backdrop helped boost retail sales in July, analysts on Friday said.

Retail sales volumes are estimated to have climbed 0.5% monthly in July after a decline of 0.9% in June from May, the Office for National Statistics reported. The June estimate was upwardly revised from a previously reported 1.2% fall.

On-year, retail sales growth was 1.4% in July, as the ONS noted that comparably poor weather hurt sales in July 2023.

"Department stores and sports equipment stores reported a boost following summer discounts and sporting events," the ONS highlighted.

Sales volumes were up 1.1% in the three months to July compared to the three months to April.

Matt Jeffers, retail strategy & consulting managing director for Accenture in the UK & Ireland said: "A hat-trick of the Euros, Wimbledon and Olympics has brought a moderate boost to retail sales in July, helped along by the warmer weather. With holiday season well underway, retailers benefited from a strong performance in department stores and sports equipment."

Looking ahead, he added: "Retailers can feel optimistic heading into August, as the ongoing summer holiday period and back-to-school shopping could continue to drive sales. However, the slow start to Spring-Summer will mean many retailers are now juggling inventory and feeling pressure to start clearance sales. They may inevitably have to take a hit to margins in certain areas to maintain this positive momentum into next month."

Pantheon Macroeconomics Chief UK Economist Rob Wood pointed out retail sales have been "enormously volatile" this year, as they are bounced around by the weather and measurement problems, which can disguise the underlying trend.

Wood said year-over-year retail sales volume growth is "steadily, if unspectacularly", trending up as UK consumers' real income growth improves, they have to replace items like televisions and clothes, and goods inflation slows relative to services.

He accepted July's boost year-on-year was due to poor weather, but noted retail sales volumes still rose 1.1% three-months year-over-year in July, the second strongest in nearly three years.

"With households already saving a larger fraction of their incomes than usual and reporting in the GfK consumers' confidence report that now is a better time to splash out on a major purchase, we expect further increases in disposable income to feed through to overall spending," Wood added.

George Roberts at Ebury said "consumer activity was also bolstered by sporting events and favourable economic factors, with easing interest rates and dovish rhetoric from the Bank of England translating to cooling mortgage rates, increasing disposable income and optimism."

"As a result, households felt more confident in their spending power, translating into higher retail footfall and stronger sales performance across the sector."

By Jeremy Cutler, Alliance News reporter

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