Concerns over Brexit ease as retail sales rebound following June slump


UK retail sales have rebounded from their June slump, providing some assurance that Brexit is not deterring shoppers from splashing out.

According to the Office for National Statistics, sales grew by 1.4% in July, much better than expectations for a 0.1% rise. 

It comes after retail sales suffered their sharpest fall in six months in June, contracting by 0.9% from a month earlier, though the Office for National Statistics said poor weather rather than Brexit was to blame.

Compared to the same time last year, July sales growth increased to 5.9%. The latest reporting period accounted for the month following the EU referendum, covering the four-week period from July 3 to 30.

Sterling rose 0.4% against the dollar on the news, rising almost a cent and breaking through 1.31 US dollars.

Against the euro, the pound also rose 0.2% to 1.15.

Average store prices, including petrol stations, dropped by 2% compared to a year earlier, and were down by 0.8% from June.

However, the value of online sales increased by 16.7% compared to last year and 1.2% from a month earlier.

All sectors saw sales growth last month, but consumers spent more at non-food stores rather than supermarkets.

Paul Morales, a retail specialist at Lloyds Bank Commercial Banking, said: "Consumer spending habits have not fallen as sharply following the referendum as had been forecast by some.

"That being the case, retailers will be hoping that the current good weather holds, and that the feel-good factor being created by the Olympics translates to further spending on food and drink and Games-related merchandise."

The better-than-expected figures are providing some hope for UK gross domestic product (GDP) in the months ahead.

"July's jump in UK retail sales is a major boost to third quarter growth prospects - and occurred despite survey evidence showing consumer sentiment slumping after the vote for Brexit," Howard Archer, the chief UK and European economist for IHS Global Insight, said. 

The weak pound may have had a role to play in boosting sales, drawing tourists to the UK to buy luxury items like jewellery and watches, Mr Archer said. 

For domestic consumers, it's crucial that post-Brexit confidence recovers, but that is going to rely on economic fundamentals including employment and inflation rates. 

"The concern remains that the fundamentals for consumers will soften appreciably over the coming months, thereby weighing down on spending. Consumers are likely to face less favourable purchasing power as inflation rises and earnings growth is limited by companies striving to limit their costs," Mr Archer added.