UK retail enjoys 'shot lived' bloom amid better weather, BRC-KPMG survey shows

Economic News

UK retail enjoys 'shot lived' bloom amid better weather, BRC-KPMG survey shows

Tue, 11 July 2017
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UK retail enjoys 'shot lived' bloom amid better weather, BRC-KPMG survey shows

(ShareCast News) - Hot weather helped UK retail sales pick up more than expected last month, according to a survey of the sector that indicated a positive contribution to economic growth for the second quarter of the year but perhaps not much longer.
Like-for-like retail sales in June were 1.2% higher than the same month last year, the monthly BRC-KPMG sales monitor revealed, recovering well from a 0.4% fall in May and ahead of 0.8% City consensus.

Total sales, which takes account of new store openings, growth accelerated to 2.0% from 0.2%.

Food sales over the three months to June increased to their strongest level in more than four years, rising 3.6% on a LFL basis and 4.7% in total, up from 2.4% and 3.6% respectively in May.

Non-food sales rose 0.9% LFL and 1.2% in total, up from 0.3% and 0.7% a month before.

The rise in LFL sales values was the biggest since October, excluding April's numbers that were distorted by the different timing of Easter, but the pick-up was driven primarily by warmer weather than usual, with England enjoying the second equal warmest June on record.

Online sales of non-food products grew 10.1% in June, with three-month sales up 8.4% versus a 0.7% in-store decline on a total basis and 1.2% LFL.

After a prolonged period of sluggish growth, the arrival of summer provided a welcome boost to non- food categories, said Helen Dickinson, chief executive of the British Retail Consortium.

"Leisure pursuits and activities spurred consumer spending on summer clothing, beauty products and outdoor toys, which were also boosted by gift purchases over Eid."

She cautioned that while June's strong performance had buoyed the six-month average sales, closer inspection shows that "rising food prices are responsible for the main component of growth and have prompted more cautious spending towards discretionary non-food items".

"Looking ahead, there's a question mark over whether this spending momentum will last, as household expenditure is increasingly squeezed from rising inflation and slowing wage growth," she concluded, calling for more government help for retailers struggling with mounting cost pressures and concerns about Brexit trade negotiations.

Independent retail analyst Nick Bubb noted that non-food did pick up, thanks to all the 'outdoor goods' like paddling pools sold, but that there were also some big declines in 'indoor goods' like TVs, so it was not all plain sailing.

Economist Sam Tombs at Pantheon Macroeconomics said the June survey pointed to a partial recovery in the official measure of retail sales volumes following May's 1.2% month-to-month decline, though he noted the improvement partly reflects inflation, rather than increased spending volumes.

"The official measure of retail sales will rise by 1.4% quarter-on-quarter in Q2, if we assume sales rose by 0.5% month-to-month in June, setting the distribution sector up to make a 0.07pp contribution to GDP growth.

"But with industrial production and construction output set to subtract collectively about 0.15pp from GDP growth, the pickup in retail sales volumes won't be big enough to ensure that the economy regained momentum in Q2," Tombs said.

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