Extract from Redwood Financial’s Economic Review August 2019
The latest retail sales figures proved to be stronger than analysts expected, buoyed by the largest rise in online spending for three years.
Official data published by ONS showed that retail sales volumes rose by 0.2% during July, defying the consensus market forecast which had predicted a 0.2% decline. This growth was largely driven by internet sales which recorded a 6.9% jump across the month, the biggest recorded online increase since May 2016.
Across the three months to July as a whole, which smooths out monthly volatility in the data, sales grew by 0.5%. While this shows that consumers have continued to support the economy as the second Brexit deadline looms, the three-monthly increase in sales was the smallest recorded so far this year and ONS described the growth rate as ‘modest’.
July’s rise in retail sales has, however, provided some hope that the economy may return to growth after suffering its first quarterly contraction since 2012 during the second quarter of the year. The hot August Bank Holiday weekend may also have boosted the economy, with a VisitEngland survey suggesting that the record number of Brits holidaying at home over that period could provide a £2.1 billion economic boost.
The latest Distributive Trades Survey conducted by the Confederation of British Industry (CBI), however, suggests conditions on the High Street remain challenging with retailers mindful of the looming Brexit threat. Indeed, the survey found that retailers expect the sharpest deterioration in business conditions since February 2009 during the coming months.
It also pointed to a weakening retail sales picture, with the survey suggesting that sales volumes in the year to August fell at their fastest pace since December 2008. The monthly retail sales balance actually fell to -49, which is the second weakest reading since records began in 1983.