UK retail sales fell in July as consumers reined in discretionary spending, with clothing and footwear suffering their sharpest monthly decline for more than a year.
Retail sales volumes dropped 0.5 per cent from June, the Office for National Statistics said, following 0.7 per cent growth in June. The June figure was revised down from an earlier estimate of 1 per cent.
The July decline was slightly worse than economists had expected, with a 0.4 per cent fall forecast.
Clothing and footwear retailers bore the brunt of the downturn, with sales plunging 2.7 per cent — the steepest fall since May last year.
Retailers and economists attributed part of the decline to the timing of promotions, with businesses bringing forward discounts into June. That helped inflate the previous month’s figures but left July facing a sharper reversal.
Online and other non-store retailers also suffered, with sales falling 3.6 per cent. Household goods stores recorded a 1.9 per cent decline.
Food sales provided one of the few bright spots, rising 0.5 per cent as hot weather encouraged shoppers to spend at supermarkets.
Alcohol retailers also performed strongly, benefiting from promotions, the warm weather and the final stages of the World Cup.
Despite the monthly setback, sales volumes were 1.1 per cent higher in the three months to July than in the previous three months, suggesting the underlying picture remains less weak than the latest monthly figures imply.
Grant Fitzner, the ONS’s chief economist, said retail sales had increased over the latest three-month period, with all major sectors except motor fuel recording growth.
“Some retailers told us that hot weather and promotions helped sales of outdoor products and items such as fans, with clothing and online sports merchandise also doing well,” he said.
But he warned that rising household costs were beginning to squeeze spending.
“Higher inflation, notably the higher energy price cap and higher petrol prices later in the month, also meant less money in shoppers’ pockets for discretionary spending outside of grocery and fuel,” Fitzner said.
The heatwave also failed to provide the expected boost to high street retailers, with footfall remaining subdued as shoppers stayed away during periods of extreme temperatures.
“Despite less promotional activity from online retailers, the high street failed to benefit as heatwaves continued to impact footfall,” Fitzner said.
The figures underline the difficult environment facing retailers as the economy heads into the second half of the year.
Matt Swannell, chief economic adviser to the Item Club, said the sector was likely to face a “challenging H2” as household incomes came under increasing pressure.
Inflation has already begun to rise, he said, and is expected to climb further over the next six months, reaching 3.5 per cent before the end of the year.
At the same time, weaker consumer demand is expected to restrain wage growth and contribute to a modest increase in unemployment.
The combination leaves retailers facing a squeeze from both sides: households have less money available for discretionary purchases, while businesses must contend with higher costs and a more cautious consumer.
For the government, the figures provide another warning that the recovery remains vulnerable to renewed inflation and pressure on household finances.
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