Retail sales edged up in July amid overall downward trend

Retail sales in the UK edged up in July, showed Office for National Statistics (ONS) figures on Friday (19), although the longer-term downward trend in consumer spending shows no sign of abating as the cost-of-living crisis worsens. 

According to the ONS, retail sales volumes rose by 0.3 per cent in July on the previous month when they fell 0.2 per cent. However, on a year-on-year basis, they were 3.4 per cent lower, further evidence that people are starting to tighten their belts amid surging inflation and rising interest rates. 

Sales volumes fell by 1.2 per cent in the three months to July when compared with the previous quarter, continuing a decline seen since summer 2021. 

Non-food stores saw sales volumes fall by 0.7 per cent over the month as sectors such as clothing and household goods weakened due to consumers making cutbacks. However, food store sales edged up 0.1 per cent, aided by the good weather. 

Meanwhile, promotions boosted trade in the online channel, with sales volumes increasing 4.8 percent in July. 

Responding to the latest ONS Retail Sales Index figures, Helen Dickinson, Chief Executive of the British Retail Consortium, said, “The summer sunshine brought a slight uplift in sales. Summer clothing, air conditioning appliances and outdoor foods all benefitted from record temperatures, but most retailers will still be seeing falling volumes in the face of rising inflation. 

“Consumer confidence has hit new lows as inflation soared past 10 per cent and talk of a recession has grown. The Bank of England expects inflation to reach over 13 per cent in October when energy bills rise again, further limiting discretionary spending for struggling households. For many businesses, 2022 is proving to be every bit as challenging as the pandemic.” 

Kien Tan, the director of retail strategy at PwC, said online promotions such as Amazon’s Prime Day event had contributed to the surprise growth in headline sales volumes last month. “Almost every other retail category continued to go backwards,” he said. 

“With the prospect of more inflation to come, the concern for retailers is that shoppers will simply have less to spend as the nights draw in.” 

Richard Lim, CEO of Retail Economics, added: “The amount of spare cash families has left after paying for essentials is evaporating fast …Cutting back on ‘nice-to-haves’, trading down to cheaper alternatives and delaying non-essential spending are all coming into play as a more cost-conscious consumer emerges.”