With retail sales rising 1% in June, Danni Hewson, AJ Bell head of financial analysis, comments on the latest retail sales figures.
Make no mistake, it’s been a tough few years for retailers dealing with a cost-of-living crisis that sapped consumer confidence (and their spare pennies) and increased costs from both domestic tax policies and a myriad of external factors including tariffs and shipping snarl-ups.
The jump in retail sales over the month of June, and the second quarter as a whole, will be bittersweet for many businesses as they were fuelled in part by some significant discounting. The latest UK inflation figures pointed to outsized summer sales as a factor in falling CPI as retailers, especially clothing stores, went out of their way to grab customer attention.
The warm weather undoubtedly helped, with many people rushing to purchase office friendly shorts and extra fans to help keep them cool as the temperatures shot up. But a lot of this activity was carried out online as people nervously eyed the price of filling up at the pump and shunned high streets in favour of their own cooler couches.
There were other factors at play, with the latest GfK confidence data highlighting a significant boost in how people were feeling about the state of the economy fuelled by England’s performance at the World Cup, the de-escalation of tensions in the Middle East and hope that Andy Burnham might make a significant impact on people’s financial lives once he took over as PM.
A confident consumer is a powerhouse and one that can lift a country’s economic growth. But many of those feel-good factors have been short-lived, with England failing to bring the World Cup ‘home’ and renewed fighting in the Middle East pushing the oil price back above $100 a barrel which is already impacting the price of fuel for UK motorists.
The warm weather has continued, and Andy Burnham has delivered a number of policy changes aimed at making people feel a little better about their household finances even if in reality most of those savings will be gobbled up by other price hikes.
What is notable is that people have still been prepared to shell out for the latest tech after companies like Apple launched new products to tempt people to upgrade their devices in order to enjoy AI advances. But retail is still under significant pressure, and it was left out of business rate cuts which will help pubs that sit side by side with them on beleaguered high streets.
The biggest test will come in the final quarter of the year, that golden period when people are thinking about how much they’ll spend on gifts to pop under those twinkling Christmas trees. With a ‘big budget’ in the offing, the UK’s new government will need to be mindful of how it controls the narrative and how it seeks to roll the pitch ahead of any difficult decisions it decides to make.
