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UK shoppers defy Brexit shock as spending jumps in July
[LONDON] Shoppers in Britain shrugged off June's shock Brexit vote as retail sales jumped by much more than expected last month, official data showed on Thursday, Warm weather boosted clothes sales and the pound's plunge tempted overseas buyers to splash out on luxury items such as watches and jewellery.
Thursday's figures represent the first official data to shed light on how consumer demand has performed since the unexpected decision by voters to leave the European Union in the June 23 referendum.
Data released earlier this week also showed little immediate impact of the Brexit vote on the labour market but there were signs of inflation pressures building after the plunge in sterling, which could eat into the spending power of households going forward.
Retail sales volumes surged 1.4 per cent in July compared with June, the Office for National Statistics said, topping all forecasts in a Reuters poll that pointed to a much smaller rise of 0.2 per cent.
"Better weather this year could be a major factor with sales of clothing and footwear doing particularly well," said Joe Grice, chief economic adviser at the ONS.
"There is also anecdotal evidence from respondents suggesting the weaker pound has encouraged overseas visitors to spend."
Sales of watches and jewellery were up 16.6 per cent in July compared with the same month last year - the biggest jump in nearly two years.
The ONS retail sales figures are volatile and Bank of England policymakers will want to see more than one month's data before drawing firm conclusions about the health of consumer spending - a key pillar of British economic recently.
Major retailers including Tesco, Next and John Lewis say they have not been affected so far by the referendum result, while the British Retail Consortium also said spending in shops bounced in July.
But the long-running GfK survey - the main measure of consumer morale and an indicator of future household spending over the years - suffered its sharpest drop since 1990 last month.
Compared with a year earlier, July sales growth jumped to 5.9 per cent, the biggest rise since September of last year and far stronger than the 4.2 per cent forecast.
The BoE more than halved its forecasts for household spending over the next two years in light of the vote to leave the EU. It now expects growth in spending of 1.0 per cent and 0.75 per cent in 2017 and 2018 respectively as lower growth in wages and higher inflation eat into spending power.