UK retail sales fall putting recovery in doubt

UK retail sale data was unexpectedly lower in July despite an ease of lockdown restrictions around the country, leading to worries about the road to economic recovery amid the Delta variant.

Following the Euro 2020 related boost in June, retail sales volumes fell 2.5% in July, their lowest level since shops re-opened in April, as per the latest figures released by the Office for National Statistics (ONS) on Friday.

However, retail sales volumes were up 5.2% in the three months to July and are 5.8% above their pre-pandemic February 2020 levels.

Food store volumes fell 1.5% compared with June "as further lifting of hospitality restrictions meant consumers had more opportunities to spend outside retail," said ONS deputy national statistician for economic statistics Jonathan Athow.

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Sales volumes of clothing and household goods both fell 2% while sales volumes in non-food stores fell 4.4% from June.

"The holiday season was a bit of a washout for sales in July. The miserable weather kept a lid on everything from BBQs at home to road-trips and shopping for a holiday wardrobe," said Sarah Coles, personal finance analyst, Hargreaves Lansdown.

Petrol sales fell 2.9%, the first fall since February, possibly because the less-than-stellar weather deterred people from venturing out.

The share of spending online rose to 27.9%. This is down from 28.4% in May, but remains higher than before the pandemic (19.8%).

“An increase in online sales suggests rising cases of the Delta variant are starting to encourage people to stay at home once more," said Equiti Capital's chief macro strategist, Stuart Cole.

"Disappointing retail sales data this morning, falling at their fastest pace since January, and suggesting that the UK consumer cannot be relied upon as the main conduit for driving UK economic activity back to its pre-pandemic levels,” he added.

However, he said that with households still sitting on a large pile of savings and the “much talked about pent-up demand still far from being fully satiated”, consumer activity may help provide a foundation for an economic recovery, just not to the extent that was previously hoped for.

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