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British retail sales fell more than expected in July as an unusually wet month discouraged shoppers from the high street, according to official statistics.
The quantity of goods bought in Great Britain fell 1.2 per cent between June and July, following expansions in the previous three months, according to data published on Friday by the Office for National Statistics.
This was a much larger drop than the 0.5 per cent contraction forecast by economists polled by Reuters.
Heather Bovill, ONS deputy director for surveys and economic indicators, said: “Retail sales fell sharply in July as poor weather impacted most sectors.”
“It was a particularly bad month for supermarkets as the summer washout combined with the increased cost of living meant sluggish sales for both clothing and food,” she said.
The wet weather boosted online retailing, up by 2.8 per cent and helped by a range of promotions including Amazon’s Prime shopping day.
Sales volumes were down 3.2 per cent compared with July last year even though consumers spent 1.1 per cent more, reflecting the impact of high inflation on household finances.
Ruth Gregory, deputy chief UK economist at Capital Economics, said the wet weather was probably a bigger driver of the fall in retail sales than the cost of living crisis. But she added that the Bank of England’s interest rate increases were still feeding through and consumer confidence was falling, leading her to be “downbeat on the outlook for overall spending this year”.
Sandra Horsfield, economist at Investec, expected consumers to increasingly struggle under the burden of higher interest rates, pushing the economy into a mild recession in the second half of this year and 2024.
The Bank of England has increased interest rates from a record low of 0.1 per cent in November 2021 to the current level of 5.25 per cent. Markets expect the bank to increase interest rates to up to 6 per cent by the end of the year.
However, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, was more optimistic as he forecast wages to outpace inflation in the months ahead as energy prices fall back and growth in food and core goods costs slows. “We continue to expect households’ real disposable income to rise briskly and to be about 2 per cent higher in Q4 than a year ago,” he noted.
The ONS data showed food stores’ sales volumes fell by 2.6 per cent in July, with supermarkets reporting that the wet weather reduced clothing sales, although food sales also fell back. Retailers indicated that the increased cost of living and high food prices continued to affect sales volumes.
Non-food stores’ sales volumes fell by 1.7 per cent in July, with retailers reporting that the fall over the month was because of poor weather reducing footfall.
Sharp falls at furniture and lighting stores drove household goods sales down 3.8 per cent, with clothing and department stores also reporting sharp declines.
The Met Office’s monthly climate report showed the UK had 170 per cent of the average rainfall for the month, making this provisionally the wettest July since 2009 and the sixth wettest July on record since 1836.