UK Retail Sales Fall More Than Expected

UK retail sales registered a bigger-than-expected fall in July as poor weather reduced footfall as the rising cost-of-living hurt household consumption, data released by the Office for National Statistics revealed on Friday.

The retail sales volume declined 1.2 percent month-on-month in July, offsetting June’s 0.6 percent increase. This was the first drop in four months. Sales were forecast to fall 0.5 percent.

Similarly, retail sales excluding auto fuel fell 1.4 percent after June’s 0.7 percent increase. July’s decline was double the economists’ forecast of 0.7 percent drop.

Food store sales slid 2.6 percent as the increased cost of living continued to affect sales volume.

Non-food store sales shrunk 1.7 percent, in contrast to the 0.6 percent in June. The decline was because of poor weather reducing footfall, the ONS said.

Supermarkets reported that the wet weather damped clothing sales.

On the other hand, automotive fuel store sales advanced 0.7 percent after a 0.6 percent drop posted in June.

On a yearly basis, the decline in overall retail sales deepened to 3.2 percent from 1.6 percent in June. The annual fall also exceeded the expected fall of 2.1 percent.

Excluding auto fuel, retail sales decreased 3.4 percent after a 1.6 percent drop in the previous month. Economists were expecting a moderate 2.2 percent fall for July.

Data showed that shoppers switched to online shopping because of poor weather and increased promotions. Online sales accounted for 27.4 percent of total sales. This was the highest proportion since February 2022.

Capital Economics’ economist Ruth Gregory said the firm is downbeat on the outlook for overall spending this year as the Bank of England’s 25 basis points interest rate hike in August is unlikely to be the last.

The growing drag on activity from higher interest rates will eventually generate a 0.5 percent peak to trough fall in real consumer spending later this year, the economist noted.

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