Retail Sales Fall Again In July

Retail sales have reported fallen to -43% during July, from -24% in June, (based on a weighted balance), according to the CBI. This is a second consecutive month of declining sales, and retailers also expect sales to drop further in August.

Wet weather has been blamed by the CBI as a key driver of weak consumer spending. Retailers have been struggling to sell stock due to slow consumer demand. Unsold product levels have reached their highest levels since June last year.

“Retailers anticipate annual sales volumes to continue falling in the next month,” the CBI said. “Sales are also set to remain below seasonal norms in August. However, some firms expressed hope for an improvement in market conditions following the general election… July marked a disappointing month for the distribution sector, with retailers feeling the sting from a harsh mix of unfavourable weather conditions and continuing market uncertainty…. While the downturn in sales volumes is set to continue next month, some firms expressed hope for an improvement in market conditions post-general election. The sector will now look for the new government to deliver on its bold reform agenda outlined in the King’s Speech to supercharge growth to effectively aid households’ finances and offer market stability.”

Economic surveys covering May and June suggest that households and businesses paused spending during the general election campaign period. Economists think that Labour’s victory might contribute to an improvement in GDP growth by removing political uncertainty from decisions on spending.

Consumer spending has been underwhelming this year, supposedly due to a higher propensity for households to save whilst interest rates are higher, and due to unsettled weather. The Bank of England’s forthcoming decision to reduce interest rates is meant to be “on a knife edge”. A cut in interest rates should encourage a drive in consumer spending by reducing the incentive to save, and making borrowing more affordable.