Shop sales rebound in July but petrol and groceries struggle

http://www.theguardian.com/business/2015/aug/20/shop-sales-rebound-july-petrol-groceries-struggle

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A burst of summer spending spurred a rebound in shop sales across the country during July, but petrol and groceries continued to drag, according to official figures.

Shoppers rejuvenated their wardrobes and dusted off their barbecues as the sun came out and loosened previously tight purse strings.

The Office for National Statistics (ONS) said the quantity of goods bought increased by 0.1% in July on the previous month, though taking the three months to the end of July it jumped 0.5% compared with the previous quarter, to maintain the annual increase in sales volumes at 4.2%.

Keith Richardson, a retail expert at Lloyds Bank, said: “Shoppers started to spruce up their holiday wardrobes in the first warm week of July, and did not stop spending all month.

“Sales of barbecue food and camping gear also rose as the sun came out, followed by toys and games as the school holidays began later in the month. Meanwhile the robust housing market continues to support sales of big ticket furniture and homeware,” he said.

But the urge to consume more electrical goods and furniture alongside clothing and hardware failed to increase the value of retail sales in July following a 3% cut in prices.

Related: Food fight: the secrets of the supermarket price war

Retailers have found that persistent price cuts have proved essential to persuade bargain-hunting households to part with cash, meaning the value of sales in July was down 0.2% compared with June.

Supermarkets have been worst affected with a price war being fought amid a long-term decline in the value of grocery sales.

Last month, the ONS reported that even falling prices had failed to tempt consumers to part with their money as shops and online traders reported a surprise drop in business.

The volume of sales in June had fallen 0.2% compared with May, as household goods joined petrol stations and food stores in registering a drop.

Simon Wells, chief UK economist at HSBC, said July’s rise of just 0.1% was well below expectations of a 0.4% rise, but the ongoing strength of consumer spending was apparent and with continued low inflation was likely to be maintained for the rest of the year.

“Clothing and footwear is the only category of shops that has raised prices over the past year (and then only by 0.8%). With inflation expected to stay very low over the coming months, this trend should continue providing support for consumption of goods and GDP growth,” he said.

Dennis de Jong, managing director at broker UFX.com, said the recent drop in oil prices to below $50 (£32) a barrel would continue to fuel high street sales.

“Following last month’s disappointing numbers, the UK is a nation of shoppers once again. It’s good news for chancellor George Osborne who’ll now be able to push the stagnant wage growth figures and unemployment rises into the long grass for the time being,” said De Jong.

“Lower fuel and food prices will have contributed to the greater expenditure at the tills, along with a seasonal increase as families take advantage of some well-earned time off and hit the shops.

“Any further signs of economic recovery and we’ll surely see [Bank of England] governor Mark Carney hike interest rates in the near future.”