Retail Sales Rise Unexpectedly In July

The ONS has published retail sales data for July, advising of 0.3% growth rather than the anticipated 0.2% decline.

Main points:

• Retail sales volumes rose by 0.3% in July 2022 following a fall of 0.2% in June 2022 (revised from a fall of 0.1%); sales volumes were 2.3% above their pre-coronavirus (COVID-19) February 2020 levels, but down over the past year.

• Looking more broadly, in the three months to July 2022, sales volumes fell by 1.2% when compared with the previous three months; this continues the downward trend since summer 2021.

• Non-store retailing (predominantly online retailers) sales volumes rose by 4.8% in July 2022; feedback from online retailers suggested that a range of promotions in July 2022 boosted sales.

• Automotive fuel sales volumes fell by 0.9% in July 2022, with anecdotal evidence that the heatwave across parts of the UK may have reduced travel and sales.

• Non-food stores sales volumes fell by 0.7% over the month because of falls in other non-food stores (negative 1.5%), and clothing stores (negative 1.2%).

• Food store sales volumes rose by 0.1% in July 2022; sales volumes were 0.1% below their February 2020 levels.

• The proportion of retail sales online rose to 26.3% in July 2022, from 25.3% in June 2022 because of strong growth in non-store retailing. Feedback from online retailers suggested that there were a range of promotions in July 2022 which boosted sales; despite this pick-up, it continues a broad downward trend since its peak in February 2021 (37.5%), but remains above pre-pandemic levels (19.8% in February 2020).

• Online spending values rose by 5.3% in July 2022. This increased the proportion of online sales which rose to 26.3% in July 2022, from 25.3% in June 2022. Despite this pick-up, the general trend in the proportion of online sales is one of decline since its peak in February 2021 (37.5%) but remains comfortably above pre-coronavirus (COVID-19) levels (19.8% in February 2020).

Responding to the latest ONS Retail Sales Index figures, Helen Dickinson, Chief Executive of the British Retail Consortium, said: 

“The summer sunshine brought a slight uplift in sales. Summer clothing, air conditioning appliances and outdoor foods all benefitted from record temperatures, but most retailers will still be seeing falling volumes in the face of rising inflation.

“Consumer confidence has hit new lows as inflation soared past 10% and talk of a recession has grown. The Bank of England expects inflation to reach over 13% in October when energy bills rise again, further limiting discretionary spending for struggling households. For many businesses, 2022 is proving to be every bit as challenging as the pandemic.”

Commenting on the Office of National Statistics retail sales figures for July 2022, Kien Tan, Director, Retail Strategy at PwC, said:

“Perhaps surprisingly, the ONS reported a slight 0.3% increase in retail sales volumes in July 2022. However, looking under the surface, and bearing in mind the additional full trading days in July given the extended Jubilee bank holidays in June, the momentum in retail sales continues to be negative, reflecting the wider cost-of-living crisis and reining back of spending by consumers.

“The improvement in retail sales in July was almost entirely accounted for by non-store sales, reflecting promotional and clearance activity online, such as the Amazon Prime Day event held in June last year, but in July this year.

“These online sales led to an increase in penetration of ecommerce to 26% - still well below the pandemic highs of almost 38%, but providing some respite for embattled online retailers, albeit at the expense of the high street, which also suffered from the effects of the heatwave in the middle of the month.

“Almost every other retail category continued to go backwards. While value sales were almost 6% higher than the previous year - excluding petrol - this was accounted for by inflation. In volume terms, sales actually declined by 3% compared to July 2021.

“This trend was most stark in grocery, which saw double digit growth in value terms - cash in the till - but in volume terms was almost flat. We saw earlier this week that inflation in grocery has soared to its highest level since 2008. As consumers told us in our most recent consumer sentiment survey, they are spending more on groceries, but taking the same amount of shopping home at the end of the day.

“With the prospect of more inflation to come, the concern for retailers is that shoppers will simply have less to spend as the nights draw in. Added to the cost-of-living crisis, the so-called “cost-of-doing-business” crisis is compounding the difficulties faced by retailers up and down the country, as they contend with increasing input, labour and energy costs. The calls for government assistance are only likely to grow in coming months.”

Source : ONS, BRC, PwC

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