Aurelia Butler

UK consumer spending defied talk of recession in July, data from industry bodies showed on Tuesday, but it still failed to match the pace of overall inflation. The value of UK retail sales grew 2.3 per cent in July compared with the same month a year ago, according to figures produced for the British Retail Consortium, a trade association, in collaboration with the professional services group KPMG. Sales last month were 10.6 per cent higher than in the pre-pandemic month of July 2019.These growth rates were lower than the rate of price increases, however, indicating that it was likely that sales volumes for retailers had fallen both during the past year and the past three years. The BRC said the small rise in the annual value of sales “masked a much larger drop in volumes once inflation is accounted for”. Consumer price inflation rose to 9.4 per cent in June and was last week forecast to reach 13 per cent by December, while prices in June were 12.9 per cent higher than three years earlier. Helen Dickinson, BRC chief executive, said sales of clothing, picnic treats and electric fans had been strong in July, reflecting the heatwave, but that this could not disguise an “incredibly difficult trading period” for retailers. “Consumer confidence remains weak, and the rise in interest rates coupled with talk of recession will do little to improve the situation,” said Dickinson. With energy bills due to rise further in the autumn, “both consumers and retailers are in for a rocky road throughout the rest of 2022”, she added. The underlying gloomy message from retailers was not entirely reflected in separate data from payments company Barclaycard, also published on Tuesday, which showed that consumers were more willing to spend money enjoying themselves last month than in the shops. Barclaycard’s data, which gathers figures from almost half of the UK’s credit and debit card transactions, found spending was 7.7 per cent up on July 2021, though it remained lower than the rate of inflation. This growth rate was up on the June annual spending growth of 6.2 per cent. The company noted that there were still large annual increases in fuel purchases, reflecting the rise in price of petrol and diesel and payment for utilities made on credit and debit cards. But it said that growth in spending on non-essential items was even faster in July as families largely enjoyed the hot weather and prepared for the summer holidays.Reporting that families were more optimistic in July about their finances, José Carvalho, head of consumer products at Barclaycard, said: “Brits [were] increasing their discretionary spending on entertainment, travel and takeaways as we head into high summer.”

Eating and drinking out rose at an annual rate of 9 per cent, while travel agents enjoyed three times the spending of July 2021 and bookings with airlines doubled. But Barclaycard said a “need to buy” mentality was emerging among consumers. It noticed evidence that households were financing increased spending on entertainment by taking a more frugal attitude to regular shopping, whereby they spent less on each supermarket visit but visited more often. Carvalho said: “This shows that, faced with difficult circumstances, many are finding ways to budget and manage their finances successfully, to cope with ongoing inflationary pressures.” More

Net premiums written in the company’s general insurance business rose 5% on a constant currency basis in the April-June quarter to $6.9 billion, while underwriting income climbed 73%.That helped AIG – one of the world’s biggest commercial insurers – report adjusted after-tax income attributable to common shareholders of $1.19 per share. Analysts had expected a figure of $1.10 a share, according to Refinitiv IBES data. But the insurer’s consolidated net investment income fell 29% to $2.6 billion, partly hurt by weakness in alternative investments such as private equity.An unabating surge in inflation, rising interest rates and the toll of the Russia-Ukraine war have rattled financial markets this year, sapping the investment income that had powered insurers’ profits last year. AIG also blamed the market volatility for a delay in the initial public offering of its life and retirement unit.The unit – set to be renamed Corebridge Financial Inc when it goes public – had filed for its offering in March and planned to complete its listing by the end of June, subject to market conditions.”Completing the IPO is a significant priority for us and we remain ready to execute,” Chief Executive Officer Peter Zaffino said without giving a new deadline for the offering.AIG had first announced the move in 2020 and it sold a 9.9% stake in the unit to private equity firm Blackstone Group (NYSE:BX) Inc for $2.2 billion last year. More

Former chancellor Rishi Sunak, one of the contenders to be Britain’s next prime minister, has pledged fresh help for households struggling with the cost of living crisis, as his allies stepped up attacks on his rival Liz Truss.Dominic Raab, the justice secretary and a Sunak supporters, claimed if Truss, the foreign secretary, were to win the Conservative leadership contest and press ahead with an emergency tax-cutting Budget it would be an “electoral suicide note” for the Tories.This came after Boris Johnson rejected calls to draw up a rapid response to the cost of living crunch involving soaring energy bills during his final weeks as prime minister, with Downing Street insisting big fiscal decisions had to be taken by his successor.The CBI employers group joined calls by Gordon Brown, the former Labour prime minister, for Johnson to start work now on a package of measures to help the vulnerable.Sunak declined to provide details of how much new support he would provide to households as prime minister — suggesting he would first need to know the revised level of the UK energy price cap due to take effect this autumn.But he said: “This winter is going to be extremely tough for families up and down the country, and there is no doubt in my mind that more support will be needed . . . bills are going up by more than anyone expected and the next government will need to act.”The regulator Ofgem is due to provide details later this month of the revised energy price cap that will be implemented in October. It is predicted it will cap household fuel bills at well in excess of £3,000 per year, compared to £1,971 currently.

Sunak said he would keep any one-off borrowing needed to pay for fresh household support to a minimum by seeking “efficiency savings across Whitehall”.Truss told the Financial Times last week she favoured tax cuts over “handouts” as the best way to help households, saying she would look at “what more can be done”. She wants to scrap a rise in national insurance — introduced by Sunak while chancellor — in an emergency Budget earmarked for September.Raab, writing in The Times, said it was wrong to rule out further direct support for families. He said: “If we go to the country in September with an emergency Budget that fails to measure up to the task in hand, voters will not forgive us as they see their living standards eroded . . . such a failure will read unmistakenly to the public like an electoral suicide note and, as sure as night follows day, see our great party cast into the impotent oblivion of opposition.”Meanwhile Johnson, who returned to work on Monday after a holiday in Slovenia, has argued that he does not have the authority to draw up new policies, including any measures on the cost of living crisis, ahead of a handover of power to his successor due on September 5.“By convention it is not for this prime minister to make major fiscal interventions during this period,” said Downing Street. “It will be for a future prime minister.”Sunak and Truss have so far proposed limited measures to address the cost of living crunch.

Tony Danker, head of the CBI, said it was not good enough. “The economic situation people and businesses are facing requires all hands to the pump this summer,” he added. “We simply cannot afford a summer of government inactivity while the leadership contest plays out followed by a slow start from a new prime minister and cabinet.” Brown said the inflation crisis was causing poverty of the kind he had not expected to see again in his lifetime and urged Johnson to convene the government’s emergency Cobra committee to prepare a response.He told Sky News that charities were stocking up on duvets, sleeping bags, hot water bottles and blankets “because they know that people can’t afford to heat their homes any more”.Brown branded as “stupid” Sunak’s windfall tax on North Sea oil and gas companies — introduced to help fund the government’s latest support for households — because it contained generous allowances for investments, cutting its potential yield from £15bn to £5bn per year.Labour is expected to unveil a plan for helping households later this month. More