Extract from Redwood Financial’s Economic Review August 2020
Official data shows that retail sales rose above pre-pandemic levels in July as a strong rebound in consumer demand continued.
According to the latest set of statistics, retail sales volumes grew by 3.6% in July compared to the previous month’s figure. This maintained the strong recovery since April’s record decline and resulted in volumes rising back above pre-coronavirus levels. Indeed, July’s total sales figure was 3.0% higher than February, the last month unaffected by lockdown.
The data once again highlighted notable performance variations across the retail landscape. For instance, although clothing store sales did rise in July, they remain the worst hit sector during the pandemic with volumes over 25% down on February. In contrast, despite falling in July, online retail sales have experienced significant growth over the pandemic, with volumes 50% higher than they were in February.
Overall, the retail sector has bounced back more strongly than economists had expected and July’s figure again topped analysts’ expectations. However, there remains a great degree of uncertainty surrounding consumers’ continuing willingness and ability to keep spending and some economists feel the recovery could prove temporary.
The latest Distributive Trades Survey published by the Confederation of British Industry (CBI) also struck a note of caution. In total, the monthly retail sales balance fell to -6 in August from July’s 15-month high of +4 suggesting a slight decline in sales compared to levels achieved a year earlier. Furthermore, September’s sales are expected to fall at an even faster rate.
Commenting on the survey, CBI Lead Economist Alpesh Paleja said: “Trading conditions for the retail sector remain tough, even against the backdrop of business slowly returning. Firms will be wary of deteriorating household incomes and the risk of further local lockdowns potentially hitting them in the pocket for a second time.”