UK retail sales rebound in July, BRC says

UK retail sales bounced back in July after a tough few months, with the strongest growth in total takings since January.

The BRC-KPMG measure of like-for-like retail sales values rebounded to 1.1% year-over-year in July, thrashing the consensus forecast for a 0.7% decline.

Total sales values rose 1.9% year-over-year, with retailers expected to have benefited from a spell of hot weather after conditions dampened footfall in earlier months, while a heavy month of summer promotions also provided a boost.

Retailers have reported prolonging their usual summer discounting, which usually ends in mid-July, due to initial weakness in spending.

On a three-month basis, total UK retail sales rose 1.1%, in line with the 12-month average of 1.2%.

“This month’s solid sales figures may come as a shock to some given the slew of early indicators suggesting that consumer activity was slowing in the wake of the referendum result," said Helen Dickinson, chief executive of the British Retail Consortium. "However, little has materially changed for most UK households in the wake of June 23, so it is not surprising to us that sales are simply responding to their normal underlying drivers."

With a heavy month of promotions proved very successful in appealing to bargain-hungry shoppers, she said the big question for retailers was whether that success can be carried forward into full price sales. "Whilst retailers continue to monitor the situation in the wake of Brexit, responding to rapid and complex change in consumer behaviour in the midst of a highly competitive market remains the substantive challenge."

Economist Sam Tombs at Pantheon Macroeconomics pointed out that retail spending is volatile from month to month and it appears to have benefited from July’s hot spell, which increased demand for food and clothing, as well as the prolonged spell of discounting.

"Since the referendum, data on housing market activity and car sales show that consumers already have become more reluctant to make big-ticket purchases," Tombs said. "We therefore think that July’s BRC report should not be interpreted as a sign that consumer spending will remain resilient. It will take time for employers to adjust their staffing numbers and inflation to respond to sterling’s recent depreciation, so 2017 likely will see the weakest period of consumer spending."