Warm weather and heavy discounts have helped drive a rebound in retail sales, potentially tempering fears of the UK economy grinding to a halt following the Brexit vote.
Figures from the British Retail Consortium (BRC), published on Tuesday, showed that the value of online and high street sales rose at the fastest pace for six months in the four weeks to 30 July. The statistics chime with other signs that shoppers shrugged off the EU referendum result and continued spending in the weeks that followed.
But economists have warned against reading too much into early indicators, while the Bank of England has predicted that growth will slow sharply over coming months, despite cutting interest rates to a record low.
July sales were up by 1.1% on a year earlier in like-for-like terms, according to the BRC’s monthly sales monitor, compiled with consultants KPMG. This marked a recovery from the 0.5% fall witnessed in June and was the strongest performance since January. In total terms, not adjusting for the effect of new store openings, sales rose by 1.9% in July, also the strongest growth since January.
The figures support consumer spending data from Visa and Barclaycard, which suggested that shopping, day trips and nights out were little affected in the immediate aftermath of the vote to leave the EU. However, they contrast with a survey from the CBI showing that retail sales volumes declined in July and a poll from market researchers GfK, which found that consumer confidence had tumbled. Surveys of businesses are also gloomier, signalling a decrease in activity across services, manufacturing and construction since the referendum on 23 June.
The BRC said the Brexit vote would pose a challenge for retailers in the months ahead, but for now, shoppers appeared to be taking a “life goes on” approach.
“This month’s solid sales figures may come as a shock to some, given the slew of early indicators suggesting that consumer activity was slowing in the wake of the referendum result,” said the BRC chief executive, Helen Dickinson.
“However, little has materially changed for most UK households [since] 23 June, so it is not surprising to us that sales are simply responding to their normal underlying drivers.”
Reflecting the pattern of low inflation throughout 2016, the BRC said retailers were continuing to rely on promotions to keep people shopping. Intense price competition has made it hard for retailers to grow their takings and the BRC’s measure of sales growth on a 12-month average basis held at 1.2% in July, the weakest since May 2009, when the UK was mired in recession.
Dickinson said the big question for retailers was whether the stronger performance in July could be carried forward into full price sales.
A mini heatwave last month helped raise food and drink sales for barbecues and picnics, and also lifted fashion sales, the BRC said.
There was also evidence of a boost to retailers and tourism from the weaker pound, which has fallen sharply since the referendum. Holidays, as a result, are more expensive for Britons going abroad, but coming to the UK is cheaper for foreign tourists.
The BRC report noted a pickup in sales of jewellery and watches as some tourists were drawn to the UK for shopping splurges.
Separate figures suggested that flight bookings to the UK jumped after the referendum, driven by demand from customers in the US and Asia Pacific. In the 28 days before the vote, flight reservations had been down 2.8% year on year. However, in the month after the referendum, they were up by 4.3%, according to travel research company ForwardKeys.
Spending was also helped last month by people finding money to go out with friends and family, despite feeling more nervous about the economic outlook, according to figures from Barclaycard.
It reported that consumer spending grew by 2.6% in July on a year earlier, but this was down from growth of 3.6% in May and June.
Spending in pubs was up by 12.2%, restaurants enjoyed a 12.8% rise and cinema spending increased by 10.1%, as Absolutely Fabulous: The Movie and Ghostbusters helped draw in customers, following a lull in June.
Barclaycard also polled 1,680 people to gauge consumer confidence, of whom 63% said they had carried on spending as they did before the Brexit vote. But half of those polled said they were not confident in their ability to spend more on nonessential items, the highest proportion since February.
Paul Lockstone, the managing director of corporate affairs at Barclaycard, said: “These are the first full month’s figures since the EU referendum, so it’s too early to say if this is the start of a long-term trend, but it seems likely consumers will be watching the external environment carefully ahead of any major spending decisions.”