Financial institutes can breathe a huge sigh of relief: Retail sales are on the up. According to the Office of National Statistics, there was a sales growth of 0.3% in July, compared to June.
It’s been a constant worry for financial experts, particularly at the Bank of England: We’re just not spending as much, in part because our wages don’t appear to be growing (indeed, the national average has essentially flat-lined) and thanks to inflation, everything seems to cost just that little bit more.
In fact, you might remember the stories over the last few months that stated that not only were sales down, but that most consumer spending was on items of necessity – typically food and fuel – while spending so-called ‘luxury’ items was down. The nation has been, in effect, tightening its belt.
Well, it seems that there’s still not much change there – it’s just we’re spending more money on foodstuffs, which has helped balance out less spending elsewhere. July saw food purchases rise by 1.5%, compared to June’s fall to 1.1%. However, only household goods saw any sort of growth; in all other sectors, sales have slumped.
Ole Black, a senior statistician at the Office of Nation Statistics, said that retail sales showed a ‘relatively subdued picture’, adding that:
‘Strong food sales have been responsible for the growth of 0.3% in July compared with June, as all other main sectors have shown a decrease. Whilst the overall growth is the same as in June, trends in growth in different sectors are proving quite volatile.’
Not everyone thinks the current figures are all bad news, though. Ben Brettel, Hargreaves Lansdown’s senior economist, believed that the figures showed how ‘extraordinarily resilient’ UK consumers were.
‘Spending has defied expectations of a slowdown since the Brexit referendum, and currently seems to be holding up despite weak wage growth and above-target inflation. This could bode well for economic growth – the UK economy is heavily reliant on the consumer, and economists had expected falling real incomes to eventually translate into weak retail sales.’
Meanwhile, Ruth Gregory, a UK economist at Capital Economics, thought that the figures for July’s retail sales were ‘fairly encouraging’, particularly since we’ve seen ‘the recent intensification of the squeeze on consumers’ real incomes and suggest that talk of a sharp consumer slowdown has been overdone.’
Gregory added that we’ve yet to see a sharp spending slowdown and, ‘What’s more, with annual retail sales values growth remaining at a still strong 4.1% in July, this suggests that consumers haven’t been tightening their belts as a result of Brexit uncertainty.’
Echoing the ONS, Andrew Sentence, PriceWaterhouseCooper economics advisor, Andrew Sentence agreed that the pictured showed only ‘subdued growth.’
‘Consumers may also be becoming more cautious about spending because of the political uncertainty following the General Election and surrounding the Brexit process. However, the main factor squeezing consumers is the weakness of the pound against other major currencies which is pushing up import prices and fuelling inflation. UK consumers are watching and waiting – for inflation to subside and for the post-Brexit to become clearer. Until there is some relief on these two key issues, subdued growth of retail sales looks set to continue through this year and into 2018.’
So, perhaps it’s not quite time to pop open the (budget equivalent of) champagne just yet. It’s good news for the economy, and for UK households, that we’re spending more than we were the month before, but as consumers, we’re still playing it safe. For now. The effects of which remain unseen.