Decreased British Retail Sales Due to Dampened Spending caused by Wet Weather

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In July, British retail sales experienced a larger-than-anticipated decline due to unusually wet weather, which discouraged shoppers from visiting physical stores, according to official statistics released by the Office for National Statistics. The data revealed that the quantity of goods purchased in the UK fell by 1.2% between June and July, overshadowing the previous three months’ expansions. Economists polled by Reuters had only projected a 0.5% contraction. Heather Bovill, ONS’ deputy director for surveys and economic indicators, attributed the sharp drop to poor weather conditions that impacted most sectors. She specifically highlighted supermarkets, which faced sluggish sales in both clothing and food categories due to the summer washout and increased cost of living. On the other hand, online retailing experienced a 2.8% increase, aided by various promotions, including Amazon’s Prime shopping day.

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In comparison to July last year, sales volumes decreased by 3.2% despite a 1.1% increase in consumer spending, reflecting the impact of high inflation on household finances. Ruth Gregory, deputy chief UK economist at Capital Economics, suggested that the decline in retail sales was mainly driven by the wet weather rather than the cost of living crisis. However, she expressed concerns about the negative influence of the Bank of England’s interest rate increases and the decreasing consumer confidence, leading her to have a pessimistic outlook on overall spending for this year. Sandra Horsfield, economist at Investec, predicted that consumers would face increasing struggles due to higher interest rates, resulting in a mild recession in the second half of this year and in 2024. The Bank of England has raised interest rates from a record low of 0.1% in November 2021 to the current level of 5.25%. Market expectations indicate that the bank may further increase interest rates up to 6% by the end of the year. In contrast, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, offered a more optimistic perspective. He anticipated that wages would surpass inflation in the coming months as energy prices decrease and the growth of food and core goods costs slows down. He noted that households’ real disposable income would continue to rise, reaching around 2% higher in Q4 compared to the previous year.

According to the ONS data, sales volumes at food stores declined by 2.6% in July. Supermarkets reported that the wet weather negatively impacted clothing sales, although food sales also decreased. Retailers stated that the high cost of living and elevated food prices continued to influence sales volumes. In July, sales volumes at non-food stores also fell by 1.7%, with poor weather reducing footfall. Household goods sales experienced a 3.8% drop, primarily driven by significant declines at furniture and lighting stores. Clothing and department stores also reported sharp declines. The Met Office’s monthly climate report highlighted that the UK had 170% of the average rainfall for July, making it provisionally the wettest July since 2009 and the sixth wettest July on record since 1836.