UK Retail Sales Beats Forecasts: Consumers Keep Spending Despite Brexit Gloom

UK Retail Shopping Boom

U.K. retail sales have gained momentum as British shoppers increased summer spending spree, and recent increment in incomes have given Britain’s struggling economy a reprieve, after a gloomy start to the year, official data revealed on Thursday. This is a positive sign Brexit is not in any way affecting retail.

Online Sales, Food & Clothing Win

According to data from the Office for National Statistics in London, the boom was influenced by online sales, food, and clothing. It also stated that UK consumers bought 2 per cent more from June to August than in the previous three-month period, and 3.4 per cent more than in the same period of 2017

Also, the data showed stores were under intense pressure, as online spending rose to 18.2 percent of all retailing, a new record. The biggest share of this was with retail businesses without physical stores.

“With incomes still under pressure and consumer caution only likely to build as no-deal Brexit warnings multiply, we think the high street faces a challenging autumn,” James Smith, an economist at ING, commented.



Andrew Westbrook, head of retail at the audit firm RSM said retailers are finding the market hard to read, which makes it difficult for them to plan. He explained that some might struggle to find funding as lenders became more careful, while others were looking for means to stockpile goods in case of a disruptive Brexit.

Solid Footing for Growth

However, compared to the beginning of the year 2018, it seems this is a sign that the overall UK economy is on a solid footing for growth. In the third quarter of 2018, retail sales flew by 3.3 per cent in contrast with August last year, stronger than all forecasts according to Reuters poll of economists. Bearing in mind that three months before August, growth in sales reduced to 2.0 percent, from previous 2.4 per cent in July.

British consumers have helped reduce the hit to the overall economy from the 2016 Brexit vote with their spending, even as their purchasing power has been constrained by high inflation and slow growth in their wages.

While consumers have largely defied the limitation of their spending power, physical store retailers have had to resort to steep discounts. According to the ONS, sales in August increased for businesses who opted to give promotions on items such as furniture and electrical appliances while food sales and clothing fell in comparison with July.



The sector is also dealing with the shift to online spending. Thursday’s figures showed online spending accounted for a record 18.2 per cent of all retailing in August.

That was slightly lower than an upwardly revised 3.8 per cent leap in July, but that jump was widely seen as a response to soaring summer temperatures.

Without forgetting the earlier forecast that had predicted low economic turnout for the UK economy, this new development has shown stronger growth than analysts had expected or anticipated. However, this will serve as a vindication of the Bank of England’s decision to raise interest rates in August, as policymakers are now more confident that economic activity was recovering from a slump earlier in the year.

Wages Rising?

More so, as retail sales growth had slowed towards the end of 2016, rising inflation squeezed household incomes. Now, the recovery of the past few months suggests that consumers are finally spending more freely as real wages start to rise.

“Retailers will be encouraged . . . this is consistent with a strengthening in overall consumer spending growth,” Ian Geddes, head of retail at Deloitte stated in an interview with Financial Times.

It’s also worthy to note that the increase in retail spending at the start of the summer was attributed to the warm weather and the World Cup: food stores had a pretty good June and July, as people spent more on gardens, projects, and trips. Reportedly, sales of televisions during the football competition also contributed to the performance of household goods retailers.

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.


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