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Retail sales data - July

ended 18. August 2023

The latest retail sales data has just been published. The full report is available >> here <<. Key points below. What impact could this have on the base rate, mortgages and property market, and why?

  • Retail sales volumes are estimated to have fallen by 1.2% in July 2023 following a rise of 0.6% in June 2023 (revised from an increase of 0.7%).
  • Food stores sales volumes fell by 2.6% in July 2023, with supermarkets reporting that the wet weather reduced clothing sales, although food sales also fell back; retailers indicated that the increased cost of living and food prices continued to affect sales volumes.
  • Non-food stores sales volumes fell by 1.7% in July 2023, following a rise of 0.6% in June 2023; retailers reported that the fall over the month was because of poor weather reducing footfall.
  • Automotive fuel stores sales volumes rose by 0.7% in July 2023, following a fall of 0.6% in June 2023.
  • Non-store retailing sales volumes rose by 2.8% in July 2023; online retailers suggested that a range of promotions boosted sales.
  • Shoppers switching to online shopping because of poor weather and increased promotions led to 27.4% of retail sales taking place online in July 2023, up from 26.0% in June 2023; this is the highest proportion since February 2022 (28.0%).

5 responses from the Newspage community

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Editor
Stephen Perkins
Managing Director at Yellow Brick Mortgages
Blaming the weather for a decline in retail sales is denial. The figures show that huge numbers of people have switched to online purchases rather than the high street, mostly for convenience but also due to the fact that, with business rates as they are, bricks and mortar retailers struggle to compete. Meanwhile, supermarkets say increased prices are reducing sales, whilst declaring record increases in profits and not passing that on through price reductions. Ultimately this data will show the Bank of England that the economy is not booming and the public is not flush with cash. So whilst another base rate increase is expected in September, it should now be just an additional 0.25%. July was a washout for retailers but it could save borrowers from being hung out to dry.
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Editor
Justin Moy
Managing Director at EHF Mortgages
The reduction in retail sales is somewhat welcome to the mortgage market, given that base rate increases and higher mortgage rates are designed to take the sting out of our spending habits. It also suggests that we are looking more online to find better prices where we need to spend. These figures will be evidence to the MPC that their plan is starting to work, if it continues to slow down then we could see some normality in mortgage rates very soon, but at the moment this might just encourage them to keep increasing the base rate, to speed up this decline.
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John Choong
Senior Equity Research Analyst at Investing Reviews
Despite Friday's poor retail sales print weakening sentiment about the UK economy, bad news could be good news for the base rate. Considering the hot wage growth data on Tuesday and sticky core inflation print on Wednesday, investors and lenders alike may ironically see this data as a consolation prize to cap off a sombre week. The reduction in spending on non-food items will be seen as a positive as it could lead to cooling inflation, especially on the core front. This could result in a lower terminal rate from the Bank of England, benefitting mortgage borrowers. Having said that, one print isn't necessarily meaningful enough to sway the central bank's decision on whether to hike rates or not at its next meeting, especially when July's print was mostly affected by bad weather. So, even though Friday's data will be seen as a positive by markets, the next set of inflation data will be key for the Monetary Policy Committee to change course.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
This should really be of no great surprise; this is exactly what tackling inflation looks like in reality; by increasing interest rates, trying to limit wage growth and not giving support to counter rising costs in energy and food, people have less money to spend. This lack of spending is exactly what has been engineered to drive down inflation, great for government promises terrible if your a small independent retailer.
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Ian Hepworth
Director at Funding Solutions UK Limited
July was a washout for retailers, many of whom are having a brutal time of it right now. The blows just keep on keep coming. The school holidays could also have had an impact on this data, with many families heading off to warmer climes. This weak data could be relatively good news on the inflation front, not that it will feel like that to retailers. However, wage inflation remains high and despite the fact inflation is falling there is a commitment from the government to reduce inflation to 5% by the end of the year. This will probably mean more pain for borrowers as the base rate is increased further.