The delayed arrival of warm summer weather in the UK resulted in a rebound in retail sales for July, as reported by the British Retail Consortium (BRC). Despite ongoing concerns about the cost of living crisis, consumers turned to purchasing summer essentials such as clothing and health and beauty products to prepare for outings and holidays, contributing to the increase in retail sales.
However, the financial strain on consumers was evident in their prioritization of essentials over big-ticket items, leading to a decline in spending on furniture and household appliances. The Bank of England's recent interest rate cut aimed to address economic concerns, with inflation dropping to the 2% target in May and June though prices remaining notably higher than in previous years.
While spending on health, beauty, and gardening products supported retail sales growth both online and in-store in July, overall consumer card spending saw a 0.3% year-on-year decline, reflecting selective discretionary spending amidst higher living costs. The Barclays data also highlighted reduced non-essential spending, particularly in clothing, home improvements, and sports equipment purchases.
In the service sector, the S&P Global UK services purchasing managers index (PMI) indicated a rise in demand at the fastest pace since May 2023, suggesting a rebound in business and consumer confidence. This growth in sales activity, marked by a PMI rise to 52.5 in July, is seen as a positive indicator for reasonable GDP growth in the third quarter of 2024.