Retail sales data still showing growth, but pace slackens
Figures released today by the Office for National Statistics showed that retail sales volumes showed slightly slower year-on-year growth of 3.6% during July, compared to June’s 3.9%. All retail sectors showed rising sales volumes, for the first time in two years.
The four main retail sectors – non-store retailing, food stores, non-food stores and petrol stations – contributed to the rise in volumes on last year. Non-food stores made the largest contribution, with department stores having an important positive effect within that.
Despite this cooling off of the pace of growth, today’s figures remain strong. In addition, early figures from the Confederation of British Industry released yesterday show that warm weather in July may be boosting prospects for retailers, with textiles and grocers performing especially well.
However, the latest figures provide extra evidence that economic growth in the UK, while set to continue, may have reached a peak. Having risen for 18 months, results for the YouGov/Cebr Consumer Confidence Index for July 2014 show no change compared to June. Weak wage growth, which was noted as a concern by yesterday’s Bank of England minutes, rising inflation, and easing house price rises are likely to be sapping confidence. The latest production and construction figures showed annual growth in those sectors weakening.
Cebr expects that the Q2 growth rate of 0.8% (which has not been confirmed yet) will be the highest of 2014 and the highest since 2010. This need not be a great worry, provided that growth continues. The confidence boost which has so far driven growth in retail sales has been strongly linked to house prices, and therefore ultimately unsustainable – a cooling of the housing market at present is no bad thing.
