Although retail sales have increased by 2.6 per cent in July, this is just a 0.1 per cent month-on-month increase from June, considerably less than analysts’ estimates of 0.4 per cent. This under performance, according to the ONS, is the result of non-store retailing and fuel.
In addition, prices fell 0.9 per cent in-store, a consequence of the continuing price war being fought on the high streets. This has been most noticeable between supermarkets, where a fall in spending of 1.3 per cent in July was the first year-on-year decline since 1989.
This is what the experts had to say about the report:
• Richard Lowe, Head of Retail & Wholesale, Barclays
“Consumer spending continues to play a significant role in aiding Britain’s economic recovery and with the new school year fast approaching, many retailers will be hoping the positive sentiment continues as parents and students get ready for the new term.”
• Dr Tim Denison, Retail Intelligence Director at IPSOS Retail Performance
“The fall in the amount spent in food stores year-on-year for the first time since records began in 1989 is the headline here… Food retailers are now feeling the heat as the economy recovers. The years of austerity have left their footprint on shopping habits with the popularity of discounters growing. The price war amongst the big four is really damaging them all and making it into a race to the bottom.”
• Keith Richardson, Managing Director, Lloyds Bank Commercial Banking
“A second successive month of weak sales figures will cause concern throughout the sector. Retailers will hope the slowdown in sales is a temporary blip rather than a prolonged decline in consumer confidence. Looking ahead retailers will hope a positive response to their summer sales will kick start a revival in consumer spending.”
• Claire Davenport, Managing Director, VoucherCodes.co.uk
“No doubt spurred on by the unusually warm British summer, consumers have clearly been hitting the High Street and bars, pubs and restaurant… The figures also showed that e-commerce made its strongest contribution this year to retail growth, with online sales growth at 14.9%. This highlights an opportunity for retailers to re-gain sales through their website and multi-channel offerings.”
The weaker than expected numbers will further ease fears that the Bank of England may seek to increase interest rates imminently, after it emerged yesterday that two members of the MPC had voted to raise the Bank Rate (although the remaining seven members subsequently voted against the proposal).
Samuel Tombs of Capital Economics said that, in spite of these results, consumer confidence remained high and falling inflation would allow wages to rise before the end of the year, reassuring: “The recovery in consumer spending should maintain its strong pace over the coming months”.