Retail sales in the UK remained resilient in the immediate aftermath of the UK’s vote to leave the European Union, according to the latest consumer spending figures from the British Retail Consortium and KPMG.
Like-for-like retail sales increased by 1.1% in July, according to the data, matching the general trend so far in 2016.
As July was a relatively warm and sunny month, food and drink, and fashion were the biggest beneficiaries of the sales growth seen.
As David McCorquodale, KPMG’s retail head noted alongside the data release:”Warmer weather helped blow away some of the post-referendum blues, boosting the UK feelgood factor and giving consumers a sense that ‘life goes on’ following the initial shock of the Brexit vote.”
Sales were also boosted by heavy discounting among many retailers, which persuaded people to spend. Helen Dickinson, the British Retail Consortium’s chief executive said “The big question for retailers is whether that success can be carried forward into full price sales.”
While retail sales grew strongly in the month, it should be noted that consumer spending is always a volatile measure of activity, and can oscillate wildly from month-to-month, meaning that July’s data may not yet reflect any impact on shoppers by the Brexit vote.
This view is corroborated by Samuel Tombs, the UK chief economist at Pantheon Macroeconomics, who said in an emailed note this morning:
“July’s BRC report, which shows that like-for-like sales grew at their fastest rate since January, backs up the upbeat BDO and VISA surveys published in recent days. Retail spending, however, is volatile from month to month and it appears to have benefited from July’s hot spell, which increased demand for food and clothing. Retailers also report that they prolonged summer discounting, which usually ends in mid-July, due to initial weakness in spending.
Since the referendum, data on housing market activity and car sales show that consumers already have become more reluctant to make big-ticket purchases. We therefore think that July’s BRC report should not be interpreted as a sign that consumer spending will remain resilient. It will take time for employers to adjust their staffing numbers and inflation to respond to sterling’s recent depreciation, so 2017 likely will see the weakest period of consumer spending.”
Since the UK’s vote to leave the EU, economic data and sentiment surveys have almost universally showed a slowing of activity in the country. Markit’s PMI surveys for Britain’s construction, services, and manufacturing sectors all point to the UK falling into a mild recession in the next year, although the Bank of England believes that the country will narrowly avoid one.