Key facts
- British retail sales volumes fell 0.5% in July.
- Annual retail sales growth slowed to 1.6% in July.
- Non-food store sales saw a significant drop.
- Food and drink sales were a positive exception.
- Consumer confidence reached a two-year high in August.
British retail sales volumes declined by 0.5% in July, returning to expected levels after a significant increase in June that was attributed to hot weather, World Cup-related demand, and supermarket promotions. The annual sales growth rate also moderated, falling to 1.6% in July from a revised 3.8% in June.
Non-food stores experienced the largest drop, falling 1.3%, with clothing sales particularly weak. Retailers had brought forward cut-price sales into June, and the July heatwaves led to more people staying home. Demand for furniture also decreased as households avoided redecorating during the extreme temperatures. Some retailers also faced longer delivery times due to the heatwaves.
Food and drink sales provided a rare positive, boosted by the warm weather and excitement surrounding World Cup matches. However, gains could have been higher if not for pubs and sports bars, which are classified as hospitality, drawing customers away from retail. The British Beer & Pub Association noted that pubs served an additional 30 million pints and generated £150 million in extra sales during the tournament.
Despite the dip in sales figures, consumer sentiment surveys indicate underlying demand has remained robust. The GfK consumer confidence indicator climbed to its highest level in two years in August.
Recent performance among major British retailers has been mixed. Clothing retailer Next reported an improved annual profit outlook for the third time this year, benefiting from sustained warm weather. In contrast, sportswear and fashion retailer JD Sports issued a profit warning, although this was primarily due to weaker performance in U.S. markets rather than domestic British sales.