Retail sales were stagnant in July as the nation’s high streets felt the effects of crimped household budgets.
Official data showed retail sales volumes, excluding petrol sales, fell by 0.2 per cent in July from a year ago and rose 0.2 per cent from June. During the three months to July, a smoother measure of recent spending patterns, both the volume and value of sales increased just 0.1 per cent from the previous three months.
Colin Ellis, economist at the British Venture Capital Association, noted that retail sales account for about 40 per cent of UK consumption. “Today’s data suggest that households are still keeping a close eye on their spending, and with large rises in gas and electricity prices looming, consumer caution could be set to intensify in the months ahead.”
Prices in the shops remain significantly higher than a year ago. The seasonally adjusted value of retail sales – which includes the effect of price changes – rose 4.3 per cent in July from a year ago. The implied deflator – a number that tries to take account of rising prices – rose by 3.1 per cent when petrol prices were stripped out, the highest year-on-year increase since October 1995.
Charles Lamplugh, lead relationship director for retail at Lloyds Bank Corporate Markets, said clients were working harder than usual to get cautious customers to spend. “Footfall is down, but also the amount of spend per customer is down. Whereas before they might have bought three items, now they’re buying one or two,” he said.
The Bank of England’s Agents report said this week that retailers were using discounting to drive sales, “with an increasing number of contacts reporting that promotions were now used almost year round”. It also reported that spending patterns had become more volatile and peaked more than usual around pay days.
However, internet sales continued to climb in spite of the malaise on the high street. Average weekly internet retail sales in July were 32 per cent higher than the same month last year, compared with a 21 per cent annual increase the previous year. Internet sales now represent 9.1 per cent of total retail sales compared with about 5 per cent before the recession began.
Shops that mostly sell alcohol and cigarettes are also having a good summer: their volume sales rose in June and July compared with the same months a year ago, the first annual increases they have enjoyed since November 2008.
Separately, the trade body for the nation’s mortgage lenders said that gross lending – which does not take account of repayments – was broadly flat in July compared with June but still stands below levels of a year earlier.
Gross mortgage lending in July was estimated at £12.6bn, based on data from the Council of Mortgage Lenders. This is 1 per cent lower than June’s gross lending figure of £12.68bn and a 6 per cent fall from £13.3bn in July 2010.
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