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GBP: one of the wettest July months on record sees retail sales down across the UK


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UK retail sales fell more than expected in July, down 1.2% month-on-month, as the unusually wet weather saw shoppers stay inside.

 

 Jeremy Naylor | Analyst, London | Publication date: Friday 18 August 2023 12:23

Economists had expected a drop, but by a far smaller -0.5%. As IGTV’s Jeremy Naylor explains, those very same economists will now be working out what this means for the Bank of England. Elevated inflation remains so there is still a need for another rate rise and with evidence of relatively robust growth in June there will be some of the Monetary Policy Committee that will want to keep the pressure on. However, these retail sales numbers show the consumer is finding the going tough.

(Video Transcript)

UK retail sales

UK retail sales down in the month of July as a result of what was an unusually wet month mid-summer. July was appalling for many parts of the country. Discount shoppers pretty much across the board. Let's take a look at the figures as they broke this morning before the equity markets opened.

We saw some movements in sterling as a result of this news. Retail sales down by 1.2% in July month-to-month expectations had been for a drop of just a half of 1%. The quantity of goods bought in the British shops fell 1.2% overall, but for the year you can see it's down 3.2%. If you look at the year overall, expectations there had been for a drop of 2.1%, so we took away your counted. These are weak numbers as illustrated by the recent news about the consumer under pressure.

Candle chart

Let me show you a 30-minute candle chart here for sterling against the USD. You can quite clearly see on the right-hand side here the drop that we saw in the wake of those figures taking us out to a daily chart. We've seen what has been overall a positive week so far. Here we are mid-morning on a Friday. I guess we'll end up holding on to much of the gains that we've seen overall in this week. The point to be made here is the fact that the economy is finding it going tough, and I think it's led by the consumer because of the rise in costs, most notably the rise in mortgage costs.

Bank of England interest rates

It's really beginning to dampen down a lot of the activity within this sector. We've already seen June gross domestic product (GDP) come out with a rise of half of 1%, which is far faster than had been expected. The big question for me is can that continue? The big thing here is what does all this mean for Bank of England interest rates? We've seen inflation hold up, retail price and consumer price inflation hold up, which would seem to indicate that the Bank of England needs to raise interest rates again by a quarter point come the next meeting, which is into September.

But you get figures out like this, and clearly if they do raise rates they're going to have to keep one eye firmly on the consumer just to check to make sure it's not going to crumple what little activity there is out there. So clearly this number out today showing a weakness within the consumer around the British economy.

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