Record temperatures drive seasonal sales ' July's retail round up

Headline inflation eased to 7.9% in June, the lowest rate since March 2022. However, grocery inflation remained historically high at 17.4%, pointing to continued cost-of-living difficulties.'

Inflation is still likely to continue to ease as the year progresses, driven by falling wholesale energy prices. 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 mortgage holders.'

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Fig 1: Consumer and business confidence both dropped in July'

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Source: GfK, Lloyds'

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After six months of steady improvement, consumer confidence dipped in July, falling six points to -30 (GfK) (Fig 1), while the major purchases index fell seven points, reflecting concerns around rising mortgage repayments and sustained inflationary pressures.''

Business confidence also recorded a significant drop in July, falling by 6 points on the previous month to 31% (Lloyds), driven by weakening economic optimism and higher borrowing costs. However, retail confidence increased by six points on the previous month to 35%.'

Seasonal boosts despite economic backdrop'

Retail sales increased 6.3% YoY in June (Retail Economics). However, when persistent high inflation is factored in, it points to the sixteenth consecutive month of declining sales values (Fig. 2).''

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Fig 2: Retail sales value and volume growth has detached due to high inflation'