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UK retail sales rise unexpectedly in July despite cost of living crisis

retail sales A woman walks past the Andreas Kronthaler and Vivienne Westwood retailer in Mayfair, on 12th August 2022, in London, England. After the Bank of England raised interest rates to 1.75%, there is a certainty that Britain will be in recession by the fourth quarter of 2022 and with inflation to climb further. (Photo by Richard Baker / In Pictures via Getty Images)
UK July retail sales inch up but spending in shops remains on decline. Photo: Getty

Online shopping discounts sparked a retail sales rebound in July but the trend of spending in shops still fell, the Office for National Statistics (ONS) said.

The volume of goods sold in July rose 0.3% after a decline of 0.2% the month before. The increase was driven by a 4.8% surge in online retail, with inflation-busting deals offsetting a decline in sales of clothing, household goods and second-hand items.

But sales fell by 1.2% in the three months to July, reflecting a gradual decline in spending since the previous summer as the cost of living crunch squeezes people’s wallets.

Read more: UK consumer confidence hits rock bottom as prices soar

Darren Morgan, director of economic statistics at the ONS, said: “Retail sales nudged up very slightly in July, but looking at the longer-term picture, they are continuing the downward trend which started last summer.

“Clothing and household goods sales declined again, with feedback continuing to indicate consumers are cutting back due to increased prices and concerns around affordability and cost of living.”

Helen Dickinson, chief executive of the British Retail Consortium (BRC), said: “The summer sunshine brought a slight uplift in sales. Summer clothing, air conditioning appliances and outdoor foods all benefitted from record temperatures, but most retailers will still be seeing falling volumes in the face of rising inflation.”

Sales are 3.4% lower than last July in further evidence that people are tightening their belts in the face of the cost of living crisis.

Richard Lim, chief executive of Retail Economics, says the outlook for the retail sector is as tough.

He said: “The amount of spare cash families has left after paying for essentials is evaporating fast. So, while sweltering temperatures boosted demand for summer clothes and supported sales of beauty products, it feels like this is the last hurrah before the impact of rising interest rates and rocketing inflation chokes spending further.

“The outlook is as tough as I can recall. Inflation is still yet to peak, and the impact of rising interest rates takes time to trickle through to households.”

Read more: One in eight resorted to buy now, pay later credit as cost of living bites

Inflation hit 10.1% in July and is expected to soar to more than 13% later this year when the latest energy price cap on household bills comes into force in October.

“Consumers are being forced to cut back, spending less on the essentials, putting off big ticket purchases and hunting out bargains wherever they can find them. Retailers chasing sales are having to work hard and it’s no accident that non store retailers have enjoyed growth in July, a month that’s been dominated by online sales and special offers,” Danni Hewson, AJ Bell financial analyst, said.

The Bank of England has warned that escalating inflation is likely to tip the UK into recession later this year.

Watch: What is a recession and how do we spot one?