UK retail sales rebound with shoppers returning after wet July

UK RETAIL sales rebounded in August as the return of more settled weather brought consumers back into the shops.

The volume of goods sold in stores and online rose 0.4 per cent in August, the Office for National Statistics (ONS) said on Friday (Sep 22). That partially recovered from a revised 1.1 per cent drop in July, when cool and rainy conditions reduced activity. Economists had expected a gain of 0.5 per cent in the latest month.

The figures come after a separate survey on Friday showed consumer confidence rose to its highest level since January last year. Together, the data suggests households are holding up reasonably well in the face of an historic run of interest-rate increases. 

“Retail recovered a little from the large fall seen in July, driven by a partial bounce back in food and a strong month for clothing, though sales overall remain subdued,” said Heather Bovill, senior statistician at the ONS. “These were partially offset by Internet sales, which dropped slightly as some people returned to shopping in person following a very wet July. Fuel sales also fell, with increased prices hitting demand.”

Food stores bounced back from soggy sales in July, with volumes rising 1.2 per cent. A recovery in clothing retailers helped non-store sales climb 0.6 per cent even as the cost-of-living crisis suppresses spending.

Wage growth is starting to outstrip inflation, bringing relief to family finances after the worst cost-of-living crunch in decades.

Consumers received a further boost yesterday when the Bank of England maintained rates for the first time in almost two years after a surprise slowdown in the rate at which prices are rising.

Next, a bellwether for the health of the retail sector, yesterday raised its profit guidance for the third time in recent months. Other retailers are also faring better, with Marks & Spencer Group raising its outlook in August to predict profit growth this fiscal year.

While the pressure on living standards is expected to ease further, households are struggling with a number of headwinds. Unemployment is rising and millions of homeowners are braced for a sharp increase in their mortgage payments as cheap-fixed deals expire. Some economists think the UK is heading for a mild recession.

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Retail sales appear on course to fall over the third quarter as a whole, thanks to the sharp fall in July. A 1.4 per cent gain in September will be needed simply to maintain sales at the level of the second quarter. BLOOMBERG