The UK consumer data paints a mixed picture that will matter for the sterling and gilt outlook heading into upcoming inflation and retail sales releases. BRC’s headline retail sales growth slowing to 1.3% year on year in July from 1.9% in June, alongside like-for-like sales easing to 1.0% from 1.7%, points to underlying softness even as World Cup related spending on food and in pubs provided a temporary lift. That divergence between resilient essential spending and continued weakness in big-ticket, non-essential categories such as footwear suggests UK consumers remain cautious on discretionary outlays despite Barclaycard’s broader spending gauge ticking up to 2.0% from 1.9% and consumer confidence reaching its highest level in 21 months. Analyst comments on building food supply chain pressures from Middle East tensions and prolonged heat add a forward looking inflation risk that could feed into food cost expectations and household budget strain heading into autumn, a theme worth watching alongside the broader oil price story already in play this week.
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England’s World Cup run gave UK food and pub spending a lift in July, but underlying retail momentum kept slowing and shoppers stayed wary of big purchases.
Summary:
- BRC total retail sales rose 1.3% year on year in July, below average and down from 1.9% in June.
- BRC like-for-like sales rose 1.0% year on year in July, down from 1.7% in June.
- Food sales rose 3.8% year on year while non-food sales fell 0.7%, with clothing supported by the heatwave but footwear declining.
- Barclaycard’s UK consumer spending measure rose 2.0% year on year in July, up slightly from 1.9% in June, with essential spending up 2.9% and non-essential spending up 1.6%.
- Pub transactions rose 10% helped by England’s World Cup semi-final run, while travel spending skewed toward domestic staycations, with airline spending down 6%.
- Middle East tensions and prolonged hot weather are building pressure across the food supply chain, raising the risk of higher food costs and renewed household budget strain into autumn.
- Barclays’ consumer confidence measure showed the most optimism about the UK economy in 21 months
British consumers spent more on food and in pubs in July, helped by England’s run to the World Cup semi-finals and a spell of hot weather, though underlying retail momentum continued to slow and shoppers remained cautious on larger purchases, according to survey data published Tuesday.
The British Retail Consortium’s total retail sales measure rose 1.3% year on year in July, a below average pace that slowed from 1.9% growth in June. Like-for-like sales, which strip out the effect of new store openings, rose 1.0% year on year, down from 1.7% the previous month. Food sales were a bright spot, up 3.8% year on year, while non-food sales fell 0.7%. Clothing sales benefited from the heatwave, though footwear sales declined, pointing to a consumer base still picking and choosing where to spend rather than lifting purchases broadly.
Barclaycard’s broader measure of UK consumer spending told a slightly more positive story, rising 2.0% year on year in July, marginally faster than June’s 1.9% increase. Within that figure, growth in essential spending ran at 2.9% while non-essential spending rose a more modest 1.6%, reinforcing the theme of consumers prioritising necessities over discretionary outlays. Pubs were a standout category, with transactions up 10% as England’s World Cup semi-final run drew people out to watch matches. Travel spending, meanwhile, skewed toward domestic staycations, with airline spending down 6% over the period.
Despite the mixed spending picture, Barclays’ measure of consumer confidence showed the most optimism about the UK economy in 21 months, suggesting sentiment may be improving even as actual spending growth on bigger ticket items remains subdued.
Looking ahead, Sarah Bradbury, chief executive of the Institute of Grocery Distribution, struck a more cautious note on the outlook for food prices specifically. She said pressures are building across the food supply chain as a result of the conflict in the Middle East and prolonged hot weather, increasing the likelihood of higher food costs and renewed pressure on household budgets as the UK moves into autumn. That warning adds a forward looking inflation risk to what was otherwise a relatively encouraging month for UK food and hospitality spending.
This article was written by Eamonn Sheridan at investinglive.com.