Sunshine and World Cup fever provides retail sales bounce
The latest ONS retail sales figures show volumes increased by 1.0% in June, driven by non-store retailing (up 4.4%), and clothing and footwear (up 1.9%).
Jacqui Baker, partner and head of retail at RSM UK said: “The uptick in retail sales highlights just how important weather is in determining consumers’ moods and their willingness to spend, which was also helped by summer discounting.
“Consumers opted to spend online to avoid the heat on the high street, stocking up on summer clothing to enjoy the hot weather at home, while investing in fans and aircon units to keep cool. With the World Cup starting in June, households opted for watch parties at home due to late kick off times, which benefitted electricals and food sales.
“The boost in sentiment appears to have carried on in July, with consumer confidence jumping from -23 to -17. However, all eyes will be on whether consumer confidence continues to improve, particularly with escalating tensions in Iran again and the recent change in Prime Minister.
“Andy Burnham’s focus on tackling the cost of living – and the latest measures, albeit small, could help towards consumers having a bit more money in their pockets.”
Thomas Pugh, chief economist at RSM UK, added: “Consumers appear to have taken the first phase of the Middle East conflict in their stride. Despite a sharp rise in fuel prices, there are few signs that households have significantly tightened their purse strings, with retail sales rising by 1.0% m/m in June and consumer confidence rebounding strongly in July.
"The combination of good weather and England's World Cup success should provide another boost to spending in July, even if some of the extra money spent in pubs comes at the expense of other parts of the high street.
"The bigger test for consumers will come later this year. Oil prices have climbed back above $100 a barrel and natural gas prices are at their highest since Russia's invasion of Ukraine. If those prices persist through the summer, inflation is likely to rise above 3.5%, increasing the risk that the Bank of England raises interest rates. That would squeeze household budgets and could start to weigh on consumer spending."