UK consumers halt shopping in rainy July

LONDON, Aug 18 (Reuters) – British retailers reported a bigger-than-expected drop in sales in July as heavy rain put off shoppers, who are also feeling the pinch of high inflation and 14 consecutive rises in prices. interest rates.

Official data showed that sales volumes last month were 1.2% lower than in June. Economists polled by Reuters had forecast a 0.5% drop.

Sterling weakened as investors assessed how much falling sales represented a warning sign of a slowdown in Britain’s sluggish economy, beyond the hit caused by the sixth wettest July on record dating back to 1836.

“It was a particularly bad month for supermarkets, as the summer slump combined with the rising cost of living meant sluggish sales of both clothing and food,” said Heather Bovill, deputy director of surveys and economic indicators at the Bureau of Statistics. Nationals (ONS). saying.

“Department store and home goods sales also fell significantly.”

Many shoppers went online rather than venturing out in the rain with 27.4% of retail sales made via the internet, up from 26.0% in June and the highest share since February 2022.

Food store sales volumes fell 2.6% month-on-month, while non-food store sales volumes fell 1.7%.

The drop followed a strong June for retailers boosted by a heat wave.

Adding to Britain’s unpredictable weather, consumers have been hit by high inflation which stood at nearly 7% last month, down from a peak of around 11% last October but still the most high among the world’s big rich economies.

However, the July data represented only the second time sales volumes have fallen month-on-month so far in 2023, suggesting resilience in consumer demand.

growing drag

Some economists said the impact of the Bank of England’s continued interest rate hikes would inevitably hit consumer spending in the second half of 2023.

“Our view remains that the growing drag on activity from higher interest rates will eventually lead to a 0.5% drop in real consumer spending,” said Ruth Gregory, deputy UK economist at Capital Economics.

market research company GfK reported last month that consumer confidence fell in July for the first time since January.

But Samuel Tombs of Pantheon Macroeconomics said accelerating wage growth and slowing inflation presented a rosier picture.

Data released this week showed basic wages growing at their fastest pace since records began in 2001, bad news for the BoE, which is worried about continued high inflation, but a boon for consumers whose profits are falling. They are catching up with price growth.

“Looking forward, we continue to expect real disposable household income to rise rapidly,” Tombs said.

Despite the July rain, Next (NXT.L) and marks and spencer(MKS.L)two of Britain’s largest retailers reported strong business and improved their profit prospects this month.

But the sector has also seen losers. Last week privately owned housewares and housewares discount retailer wilko collapsed in administration, putting 12,500 jobs at risk.

Retail sales volumes were 3.2% lower than a year earlier, the ONS said, compared with economists’ forecasts for a 2.1% drop.

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