Official data shows retail sales in the UK edged up in July, although the longer-term downward trend in consumer spending shows no sign of abating as the cost-of-living crisis worsens.
According to the Office for National Statistics (ONS), retail sales volumes rose by 0.3% in July on the previous month when they fell 0.2%. However, on a year-on-year basis, they were 3.4% lower, further evidence that people are starting to tighten their belts amid surging inflation and rising interest rates.
Looking more broadly, sales volumes fell by 1.2% 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% 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%, aided by the good weather.
Meanwhile, promotions boosted trade in the online channel, with sales volumes increasing 4.8% in July.
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.
“The outlook is as tough as I can recall. Inflation is still yet to peak, and the impact of rising interest rates takes time to trickle through to households. Consumer confidence has hit an all-time low, and even those that do have cash to spend will be more inclined to bolster their rainy-day fund given such an uncertain outlook”.
