Economists predict slight retail rise is calm before the storm (Jane Barlow/PA)
(Picture: PA Wire)Retail enjoyed an unexpected summer bounce last month as promotions and hot weather persuaded shoppers to spend heavily online.
Sales volumes were up 0.3% in the month, compared with City forecasts of a 0.2% dip, providing a brief respite for the long suffering high street.
However, most economists said the monthly rise — only the second this year — was the calm before the storm as massively higher energy bills this autumn rapidly choked off spending.
It came in contrast to today’s GfK UK consumer confidence index which fell to a fresh record low in August.
The July retail blip may also tip the Bank of England’s Monetary Policy Committee towards ordering another half point interest rate rise when it meets next month.
In more worrying economic news, Government borrowing was a larger than expected £4.9 billion in July, a month once associated with surpluses as tax receipts pour in.
Fuel sales volumes fell by 0.9% in July 2022, with anecdotal evidence that the heatwave may have reduced travel. Food store sales rose by 0.1% while non-food stores saw volumes fall by 0.7%.
Danni Hewson, financial analyst at brokers AJ Bell, said: “People can only spend a pound once and that pound isn’t buying what it used to.
“Whilst sales did pick up slightly in July compared to the previous month, taken as a whole the last three months has been tough for retailers.
“The story is writ large when you compare the same quarter a year ago. Whilst the amount of stuff people are buying is down by almost 5% compared to 2021, the amount they’re paying for that stuff is up by 5.5% — so that implies price growth of 10.4% — slightly above current CPI.”
Martin Beck, chief economic advisor to the EY ITEM Club, said: “July’s rise in retail sales is likely to prove only a temporary respite from recent weakness as we move through 2022 and into next year. Granted, unemployment being very low and household balance sheets, in aggregate, appearing healthy mean there are some positives.
“But the EY ITEM Club expects the typical household energy bill to rise by around 80% in October, pushing inflation even further into double figures and exerting an ever-more severe squeeze on households’ spending power.”
Ruth Gregory Senior UK Economist at forecasters Capital Economics, said: “We doubt the recent resilience in consumer spending will last for much longer. Even so, July’s rise in retail sales provides another reason to think that the Bank of England will raise interest rates by 50 basis points rather than 25 at its next policy meeting in September.”
