Introduction: UK retail sales return to growth
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
A busy week for UK economic data ends today, with the news that retail sales across Great Britain have returned to growth.
Retail sales volumes rose by 0.5% in July, the Office for National Statistics reports this morning. That follows a fall of 0.9% in June when households cut back amid poor weather, and election uncertainty.
Department stores and sports equipment stores reported a boost in sales “following summer discounts and sporting events” last month, the ONS says.
Sales volumes were 1.4% higher compared with July 2023, when bad weather hit the high streets.
But, volumes are still 0.8% lower than pre-pandemic levels.
The pattern of spending was mixed, though.
Sales volumes at “non-food stores” rose by 1.4% in July – driven by higher takings at department stores – after a 1.9% drop in June.
Retailers suggested that summer discounting and sporting events, such as the European football championship in which England and Scotland competed, boosted sales.
But, automotive fuel sales volumes fell by 1.9% in the month.
ONS director of economic statistics Liz McKeown says:
“Retail sales grew in July led by increases in department stores and sports equipment shops with both the Euros and discounting across many stores boosting sales.
“These increases were offset by a poor month for clothing and furniture shops, and falling fuel sales, despite prices at the pump falling.”
We learned yesterday that the UK economy grew by 0.6% in April-June, and was the strongest growth in the G7 group of advanced economies over the past six months.
This morning’s retail sales data suggests the UK economy continued to grow last month; Michael Brown, senior research strategist at brokerage Pepperstone, says:
This morning’s UK retail sales figures showed that consumers started the third quarter of the year on a relatively solid footing, with sales having risen by 0.5% MoM, and by 0.7% MoM when fuel is excluded from the data, implying that the solid economic momentum seen in the first half of 2024 has continued at the start of the third quarter.
The agenda
-
7am: UK retail sales report for July
-
10am BST: Eurozone trade balance 10am
-
1.30pm BST: US building permits/housing starts 1.30pm
-
3pm BST: University of Michigan’s US consumer confidence 3pm
Key events
CMA decides against in-depth study of baby formula market
The market for baby and toddler formula milk in Britain is not working, the competition regulator believes.
Six months after launching an investigation into the infant milk market, the Competition and Markets Authority has decided not to escalate this probe.
While it believes the current regulatory framework and the behaviour of manufacturers and suppliers are leading to poor market outcomes, the CMA wants to press on and devise workable solutions for governments to consider, as soon as possible. Beginning a full-scale market investigation would slow that down.
It’s expected to publish its interim report in October 2024, including provisional recommendations for action.
In February, the CMA warned that the cost of infant milk remained at “historically high” levels despite some price falls in recent months.
Doctors have warned that the health of babies from low income families is being put at risk by high prices.
In November, the CMA found there was only one UK retailer, Aldi, that sold own-label formula, and that competition was hampered because parents were reluctant to switch brands, either because they were recommended by friends and family or because their baby would only drink one type.
With retail sales volumes increasing across most categories last month, many retailers will be cautiously optimistic, says Tom Youldon, partner at McKinsey & Company.
Fragile consumer confidence may be lifted as inflation continues to hover close to the 2% mark and the first cut to interest rates since 2020 starts to feed through to household budgets.
While milestone events like the return of Taylor Swift’s Eras Tour and the final bank holiday could also give retailers an opportunity to deliver value, drive engagement and increase conversion with carefully planned promotion strategies.”
Pound hits three-week high
Sterling has risen to its highest level in almost three weeks.
The pound has gained 0.2% to $1.2875, the highest level since 29 July.
Today’s retail sales report also shows the impact of inflation.
Compared with 2019, shoppers are spending 18.5% more, but taking home 2% less stuff.
Here’s a chart showing how department stores led the way last month, with a 4% rise in sales volumes:
Retail sales “bounced back strongly in July as expected”, says Neil Birrell, chief investment officer at Premier Miton Investor.
There is little doubt that the UK economy is moving along nicely with virtually all indicators pointing in the right direction, with sales volumes now virtually back to pre-COVID pandemic levels.
The stability of the economy must be making the UK look like an attractive place for international investors.”
Introduction: UK retail sales return to growth
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
A busy week for UK economic data ends today, with the news that retail sales across Great Britain have returned to growth.
Retail sales volumes rose by 0.5% in July, the Office for National Statistics reports this morning. That follows a fall of 0.9% in June when households cut back amid poor weather, and election uncertainty.
Department stores and sports equipment stores reported a boost in sales “following summer discounts and sporting events” last month, the ONS says.
Sales volumes were 1.4% higher compared with July 2023, when bad weather hit the high streets.
But, volumes are still 0.8% lower than pre-pandemic levels.
The pattern of spending was mixed, though.
Sales volumes at “non-food stores” rose by 1.4% in July – driven by higher takings at department stores – after a 1.9% drop in June.
Retailers suggested that summer discounting and sporting events, such as the European football championship in which England and Scotland competed, boosted sales.
But, automotive fuel sales volumes fell by 1.9% in the month.
ONS director of economic statistics Liz McKeown says:
“Retail sales grew in July led by increases in department stores and sports equipment shops with both the Euros and discounting across many stores boosting sales.
“These increases were offset by a poor month for clothing and furniture shops, and falling fuel sales, despite prices at the pump falling.”
We learned yesterday that the UK economy grew by 0.6% in April-June, and was the strongest growth in the G7 group of advanced economies over the past six months.
This morning’s retail sales data suggests the UK economy continued to grow last month; Michael Brown, senior research strategist at brokerage Pepperstone, says:
This morning’s UK retail sales figures showed that consumers started the third quarter of the year on a relatively solid footing, with sales having risen by 0.5% MoM, and by 0.7% MoM when fuel is excluded from the data, implying that the solid economic momentum seen in the first half of 2024 has continued at the start of the third quarter.
The agenda
-
7am: UK retail sales report for July
-
10am BST: Eurozone trade balance 10am
-
1.30pm BST: US building permits/housing starts 1.30pm
-
3pm BST: University of Michigan’s US consumer confidence 3pm