UK consumer spending slowed in July as wet weather damped demand for summer clothing, leaving overall retail sales growth well below the rate of inflation, according to data published on Tuesday.
The value of retail sales rose at an annual rate of 1.5 per cent in July, a weaker reading than the average of 3.3 per cent in the three months to July, and the 12-month average of 3.9 per cent, figures from the British Retail Consortium trade body and the advisory firm KPMG showed.
The figures are not adjusted for inflation and these growth rates were lower than the rate of increase in consumer prices, which stood at 7.9 per cent in June, indicating that sales fell in volume terms.
Helen Dickinson, chief executive of the BRC, said the slowdown was partly a reflection of inflation starting to slacken, but she added that the damp weather “did no favours to sales of clothing”, while online spending fell year on year as a post-pandemic return to bricks and mortar stores continued.
Paul Martin, UK head of retail at KPMG, said that while UK consumers had proved resilient in the face of cost of living pressures, “stubbornly high inflation coupled with rapidly rising interest rates will test their ability and willingness to keep on spending for the rest of this year”.
The BRC and KPMG data paints a similar picture to separate figures released on Tuesday by the payments company Barclays, which monitors almost half of UK credit and debit card transactions.
They showed annual growth in consumer card spending had slowed from 5.4 per cent in June to 4 per cent in July, again well below the rate of consumer price inflation.
But while Barclays also said the month had been a washout for clothing retailers, it found consumers were turning to wet weather alternatives, with spending on takeaways and digital content rising by 9.2 per cent and 9.9 per cent, respectively.
Meanwhile, live events, including the start of pre-booking for the singer Taylor Swift’s “The Eras” tour, boosted spending on entertainment.
This, along with strong travel bookings, meant spending on non-essentials grew faster — at an annual rate of 5.6 per cent — than it did in supermarkets, where price rises were finally slowing.
Abbas Khan, UK economist at Barclays, said the headwinds of high inflation were abating, but this would be offset by rising mortgage costs as homeowners reached the end of fixed-rate deals.
“Accordingly, while we do not expect a consumer recession in the coming quarters, growth is likely to be meagre,” he said.
Source: Economy - ft.com
