Retail sales defy 'overdone' fears of spending squeeze

Retail sales continued to increase last month in an optimistic signal that fears of a consumer spending slowdown have been "overdone", says the BBC.

According to Office for National Statistics (ONS) estimates, the total volume of sales across the sector rose by 0.3 per cent in July compared to June.

This would have been half the rate recorded in June, but the growth rate recorded for that month has been revised lower. Growth between May and June is now thought to have been 0.3 per cent.

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Food sales, which fell by 1.1 per cent in June – a drop thought to be a result of price deflation easing – bounced back with a rise of 1.5 per cent in July, propping up the overall figures.

Aside from food, only "household goods" saw an increase in July, the ONS adds.

It was widely assumed that rising inflation, which is running at a faster rate than pay growth and eating into disposable household income, would reduce consumer spending.

Reports and surveys from the likes of the British Retail Consortium hint at a sharp slowdown in retail footfall last month.

Howard Archer, an economist at EY Item Club, maintained "the numbers pointed to a squeezed consumer who was delaying spending on one-off items", says the Financial Times.

"This fuels suspicion that the pick-up in retail sales in the second quarter was partly a correction to the sharp fall in the first quarter, helped by some warmer weather and the later Easter."

But Ruth Gregory, an economist on the UK team at Capital Economics, told the BBC the July figures were "fairly encouraging".

She says that "given the recent intensification of the squeeze on consumers' real incomes", the retail figures for July "suggest that talk of a sharp consumer slowdown has been overdone".

Shoppers shun high street and rein in leisure spending

14 August

British shoppers spurned Britain's high streets and shopping centres in July in what commentators see as further evidence of a squeeze on household incomes from higher inflation.

Overall shopper footfall fell by 1.1 per cent in July compared to the same month last year, according to the latest British Retail Consortium (BRC) monthly survey, reports the Daily Telegraph.

The news is particularly bad for for UK high streets, where footfall fell by 2.1 per cent last month compared to 2016, and shopping centres, which were down by 1.3 per cent year on year.

Retail parks with large out-of-town supermarkets were the only area of growth. These "benefitted from a 1.7 per cent rise in footfall", says City AM.

Analysts say the report shows further evidence of a decline in consumer spending overall at a time when "real" after-inflation wages are in decline.

The figures come on the back of broader consumer spending data from the payment cards provider Visa, which last month pointed to the longest losing streak for more than four years.

Taken together, there's a strong sense that spending on non-essential items is in marked decline.

"The overall decline in footfall translated into weak sales performance for stores in non-food particularly," says Helen Dickinson, chief executive of the BRC.

For the first time since January, footfall fell in both normal hours and in relation to evening spending post-5pm, suggesting that leisure spending on previously buoyant areas like eating out has also taken a hit.

Weather may have played a big part in July's dire numbers, according to the Telegraph, as the usual summer "sunshine boost" gave way to "heavy storms and rain".

Consumer spending clocks up worst run for four years

7 August

Consumer spending declined again in July, "its longest losing streak in over four years", says The Independent.

Spending was down by around 0.8 per cent last month, according to payment card provider Visa, which accounts for around £10bn worth of transactions annually.

The drop was more severe than June's 0.2 per cent slide, but not quite as sharp as the 0.9 per cent contraction in May.

However, it was still the third consecutive month of decline, the first time that has happened since February 2013.

"The figure provides further evidence that rising prices and stagnant wage growth are squeezing consumers' pockets," said Kevin Jenkins, managing director for Visa in the UK and Ireland.

Import costs have risen due to the slump in the pound since the vote for Brexit last year, which in turn has hit prices. Inflation ran at 2.6 per cent in June, but pay growth is only around two per cent and real wages are in decline.

Shoppers have been particularly curtailing their spending on "new clothes, cars and foreign holidays", says The Guardian.

Clothing sales fell 5.2 per cent in July, following on from a survey by accountants BDO last week showing a monthly decline of 3.5 per cent, the worst in eight years.

Figures from the UK car industry also showed new sales falling for the fourth month running, dropping 9.3 per cent to 161,997.

A rise in so-called "staycations" dented spending on transport by 6.1 per cent, but Visa highlighted a corresponding six per cent increase in spending in hotels, restaurants and bars around the country.

Overall the services sector, which includes the likes of financial services, edged up in July, leading researchers IHS Markit to forecast "sluggish but steady" economic growth in the months ahead.

Retail sales fall by 1.2 per cent

15 June

Further evidence has emerged that the slump in the value of the pound after the UK voted to leave the EU is squeezing households and hurting the economy.

According to the Office for National Statistics (ONS), retail sales grew at their slowest annual rate since April 2013 last month, having risen just 0.9 per cent over the past 12 months.

On a monthly basis, retail sales fell by 1.2 per cent compared to April, a drop far greater than the 0.8 per cent decline that was widely expected.

The ONS puts the blame firmly at the door of the fall in the value of the pound since the EU referendum last year. It says this increased input costs and sent shop prices up by 2.8 per cent compared to May 2016.

That's the fastest rate since March 2012 and is pretty consistent with wider inflation figures, which put consumer price rises at an average of 2.9 per cent last month.

According to separate figures published yesterday, average wages in Britain are increasing at an annual rate of just 1.7 per cent, which means real pay is falling to the tune of 0.6 per cent.

People therefore have less disposable income and this means they spend less. On Monday, Visa reported its first fall in consumer spending for four years.

This is bad news for the UK economy, which depends heavily on the services sector.

Samuel Tombs at Pantheon Macroeconomics told The Guardian: "Retailers have not finished yet passing on higher import prices to consumers, wage growth looks set to remain depressed and banks are reporting that they intend to restrict the supply of unsecured credit.

"As a result, we expect quarter-on-quarter growth in households' real spending to average just 0.2 per cent in the remaining three quarters of 2017, ensuring that the overall economy continues to struggle."

UK consumer spending falls for first time in four years

12 June

Consumer spending fell for the first time in nearly four years last month, according to figures published by Visa, the credit card provider.

The drop in spending sends a negative signal to the UK economy, which has seen inflation accelerate over the past year. The economy is suffering because it's reliant on a services sector that in turn depends heavily on consumer spending.

Spending on Visa cards fell by 0.8 per cent year-on-year in May, the first annual fall since September 2013. Compared to April, sales were 1.8 per cent lower.

The provider's cards account for around £10bn of transactions annually and its "index has generally provided a good guide to the broad trends in the official data," says the Financial Times.

But "the monthly data can sometimes provide misleading signals", the paper cautions.

Sky News says that physical sales declined sharply, by 5.3 per cent year on year, while online sales surged again by 6.9 per cent.

Behind the headlines there were declines on an annual basis in sales of clothing and footwear (5.2 per cent), household goods (4.1 per cent) and food and drink (0.6 per cent).

The only rises were in leisure spending in areas such as eating out (up 3.3 per cent) and on recreational spending in areas such as cinema visits (up 2.2 per cent). These increases are part of a long-running trend.

Even in these sectors, though, growth was down from April's rates of 9.1 and 2.8 per cent respectively.

Falls in spending come at a time when inflation is rising and running well ahead of wage growth, thereby squeezing disposable income. Consumer price rises hit 2.7 per cent in April, while pay was rising on average by less than two per cent.

All of this is bad news for the services sector and consumer spending-dependent economy, which grew by 0.2 per cent in the first quarter.

The figure is markedly down from 0.7 per cent in the last quarter of last year, primarily as a result of a decline of 0.8 per cent in the services sector.

Retail sales surge after Easter boost

09 May

Retail sales leapt at the fastest rate for 11 years in April, according to the British Retail Consortium (BRC).

Total consumer spending rose 6.3 per cent last month year-on-year, a sharp reversal on March, when sales had fallen by one per cent in comparison with 2016.

However, experts warn this may not be a sustained turnaround.

BRC chief executive Helen Dickinson said the "longer term signs of a slowdown [suggested] the outlook isn't as rosy" as figures implied, reports the Financial Times.

"Most of the rise was the result of Easter falling in mid-April this year, compared with late March last year," the FT adds.

"Unlike official retail sales figures, which have yet to be published for April, the BRC figures measure the value of retail sales in shops and online, but do not adjust for the changing date of Easter."

With inflation above the Bank of England's target at 2.3 per cent and rising, due to a slump in the value of the pound, shoppers face a squeeze ahead.

BRC's figures also suggest there is already caution in many parts of retail outside of food.

Food store sales were up 3.6 per cent over the same period, with non-food store sales growing 1.2 per cent. Over the three months to April, non-food sales rose just 0.7 per cent compared to last year.

Pound jumps above $1.25 on rising retail sales

23 March

Sterling rose by 0.3 per cent to above $1.25 against the dollar today after two positive reports were published on retail sales.

The Office for National Statistics (ONS) tracked a 1.4 per cent increase in sales in February compared to January, says the BBC.

Elsewhere the Confederation of British Industry (CBI) said a net balance of nine per cent of its retailer members reported sales had increased in February in line with the figure for January, according to Reuters.

In the case of the ONS data, this increase was over three times higher than the figure predicted by analysts, who had forecast a 0.4 per cent rise.

The CBI data also beat consensus analyst expectations of a fall to a net positive reading of five per cent.

These figures are regarded as a bullish indicator for the services-dependent UK economy, which continues to display startling resilience despite the looming uncertainty of Brexit.

But the news is not entirely positive.

The ONS said that retail sales over the three-month period to February as a whole declined by 1.4 per cent. This is attributed to rising fuel costs and, says Reuters, is the fastest decline since March 2010.

Meanwhile the CBI says that its measure for retail sales remains below the seasonal average for this month compared to recent years.

Howard Archer at IHS Markit said: "With consumers now seemingly moderating their spending, the long-anticipated slowdown in the economy looks set to materialise unless other sectors can make significantly increased contributions."