UK retail sales rose more than expected in July, boosted by good weather and the women’s European football championship, shows delayed data released today (Sept 5) by the Office for National Statistics (ONS).
Sales volumes during July increased 0.6 per cent, ahead of economists’ forecasts of a 0.2 per cent rise. Non-food store volumes rose by 0.6 per cent, driven by clothing chains, while food stores suffered a 0.2 per cent fall.
However, there was 2.5 per cent boost from non-store (online) retailers, which was put down to the weather.
The annual growth rate came in slightly below forecast at 1.1 per cent and sales fell 0.6 per cent in the three months to July.
The revised data showed June’s monthly growth rate was 0.3 per cent compared to a previous figure of 0.9 per cent. There were significant other corrections to past data, with supermarkets having the largest contribution to revisions over the last 12 months, followed by mail-order retailers.
The ONS had delayed the latest data release to allow more time to correct previous seasonal adjustments that had not accounted properly for holidays such as Easter and the different lengths of different months’ collection periods for retail data.
“The retail sales figures are a bit softer than they look,” said Paul Dales, chief UK economist at Capital Economics. He noted that the revisions left sales volumes 0.5% below where they had been previously, and July’s boost largely reflected one-off factors.
Nicholas Found, Head of Commercial Content at Retail Economics, added, “Despite heatwaves and a summer of sport giving some areas of retail a welcome lift in early July, sales momentum across categories is patchy beneath the surface, including food facing renewed pressure from price rises.
“Homewares and fashion continue to rely heavily on promotions rather than a meaningful recovery in demand. That said, we’re seeing selective spending in categories benefiting from innovation in technology and wellbeing.”
He concluded: “With the Autumn Budget looming, new concerns around tax and borrowing costs are weighing on sentiment. Retailers are already grappling with a wave of structural cost pressures, from wages to business rates. With the Budget falling late into this year’s golden quarter, there’s a real risk that uncertainty could choke discretionary spending just as retailers gear up for their most critical trading period.”
Thomas Pugh, chief economist at RSM UK, added: “The revision to the seasonal adjustment process means the recovery in retail sales this year is a bit less impressive than we previously thought. Indeed, we had previously suggested that some of the recent volatility in retail sales was down to poor seasonal adjustment rather than swings in underlying sales. The level of retail sales in June was 0.5% lower than formerly.
“The 0.6% m/m increase in retail sales volumes suggests that the economy continued to recover in July. Combined with the tick up in consumer confidence in August, it suggests that consumers may be starting to open their wallets.
“The big question now is whether speculation about further tax rises in the budget and rising inflation will knock the recovery back in the second half of the year, in the same way that we saw in 2024.”