Retail sales in the United Kingdom have rebounded owing to warm weather and huge discounts, which could potentially reverse fears that the economy is grinding to a halt after the UK voted out of the EU.
The British Retail Consortium published a report on Tuesday highlighting the sales of online and high street products increasing at its fastest rate for six months in the four weeks ending July 30. The statistical reports coincide with other indications that consumers are no longer strongly affected by the aftermath of the referendum results and resumed spending in the weeks after.
Early indicators, however, should not be solely relied on according to economists. The Bank of England is warning the country that there will be a steep decline in growth in the coming months even as interest rates are at their lowest.
Sales in July were up by 1.1 percent against the previous year in like-for-like terms, as stated by the monthly sales monitor of the BRC, compiled along with consultants from KPMG. The data showed a rebound from the 0.5 percent fall experienced in June and has been the strongest performance since January.
Consumer spending data gathered from Visa and Barclaycard coincide with reports stating that shopping, day trips and nights out have not been strongly affected in the immediate aftermath of Brexit. The data, however, is a contrast to the data gathered by the CBI that showed July sales retail volume went down. It also runs contrary to the market research of GfK that reported a decline in consumer confidence that were reflected by surveys of businesses who reported a decline in activity across services, manufacturing and construction ever since the referendum on June 23.
According to the BRC, the vote to leave EU will continue to be challenging for retailers in the coming months, but currently, consumers are going about their usual lives in a “life goes on” approach.
“This month’s solid sales figures may come as a shock to some, given the slew of early indicators suggesting that consumer activity was slowing in the wake of the referendum result,” said the BRC chief executive, Helen Dickinson.“However, little has materially changed for most UK households [since] 23 June, so it is not surprising to us that sales are simply responding to their normal underlying drivers.”
According to the BRC’s data, low inflation in 2016 caused retailers to rely more on promotions to encourage people to shop. High price competition made it difficult for retailers to increase their margins with data reflecting the experience with sales growth of 1.2 percent in July on the basis of averaging 12 months. It is the weakest record since the recession that gripped the country in May 2009.
Paul Lockstone, managing director of corporate affairs at Barclaycard, said, “These are the first full month’s figures since the EU referendum, so it’s too early to say if this is the start of a long-term trend, but it seems likely consumers will be watching the external environment carefully ahead of any major spending decisions.”