Dull weather stifles seasonal spending ' August's retail round up

Headline inflation eased to 6.8% in July, the lowest rate since March 2022. However, core inflation remains high at 6.9%, suggesting persistent underlying cost pressures in the economy.'

Inflation is still likely to continue to ease as the year progresses, as wholesale energy and food prices fall, and supply chain disruptions are reduced. However, August has seen the Bank of England increase its interest rate to a 15-year high of 5.25%, which will further dent the discretionary spending power of mortgagers.'

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Fig. 1: Consumer confidence returned to growth in August'

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Source: GfK'

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After a sudden drop in July, consumer confidence increased by five points to -25 in August (GfK) (Fig. 1), with particularly optimistic readings for forward-looking measures as well as an eight-point surge in the major purchases index. This points to growing consumer resilience in the face of easing inflation and rising average weekly earnings.''

However, the overall measure remains firmly in negative territory, with the prospect of further interest rate rises, putting sustained financial pressure on households.'

Seasonal boosts despite economic backdrop'

Retail sales increased 2.8% YoY in July (Retail Economics). However, when persistent high inflation is factored in, it points to the seventeenth consecutive month of declining sales values (Fig. 2).''

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Fig. 2: Inflation is easing but retail volumes remain in decline'