The latest retail sales figures for Great Britain make for dismal reading, and it seems noteworthy that the Office for National Statistics flagged reports of the dampening impact of food prices and the cost of living more generally as it published them.
Retail sales volumes tumbled by 1.2% month-on-month on a seasonally adjusted basis in July, having risen by 0.6% in June. The July fall was much sharper than the 0.5% month-on-month decline forecast by economists in a poll by Reuters.
Wet weather did not help. However, the UK economic backdrop of high inflation and weak growth looks to have exerted a major drag last month.
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The ONS noted: “Food stores sales volumes fell by 2.6% in July 2023, with supermarkets reporting that the wet weather reduced clothing sales, although food sales also fell back; retailers indicated that the increased cost of living and food prices continued to affect sales volumes.”
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Non-food store sales volumes meanwhile fell by 1.7% month-on-month in July, having risen by 0.6% in June. Non-store retailing, comprising mainly online sales, did show a 2.8% month-on-month rise in volumes in July, helped by various promotions.
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Looking forward, it is difficult to see much relief for retailers. While inflation might at long last be falling from dizzying levels, the rises in prices seen already are baked in. And prices are still increasing at a wearying pace.
Furthermore, households are having to deal with a hike in UK base rates from 0.1% in December 2021 to 5.25%.
Thomas Pugh, economist at accountancy firm RSM UK, said: “While the wet weather bears some responsibility for the weakness in retail sales in July, underlying demand also appears to have softened at the start of Q3.
“The worst is probably behind retailers. However, trading will remain difficult for the rest of the year.”
He noted, while inflation was falling, mortgage and rent payments were higher.
Mr Pugh added: “What’s more, consumer confidence fell sharply in July, suggesting that the unrelenting headlines about mortgage rates are taking a toll on consumers, meaning many will choose to use any extra income to pay down debt rather than splurge on retail therapy.
“Overall, we expect retail sales volumes to moderately tick up over the rest of the year, but a greater rebound will have to wait until the economy improves more broadly, which probably won’t be until the second half of 2024.”
These are most difficult times in the UK, which also continues to be dragged down by Brexit.
And there sadly remains precious little sign of anything much to cheer about on the economic front.
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