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Hottest June on record sees bumper lift in UK retail sales

Paloma Kubiak
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Paloma Kubiak

UK retail sales are estimated to have risen by a better-than-expected 0.7% in June, as the scorching summer sun saw Brits hit the high street and spend some cash.

The Office for National Statistics (ONS) revealed a significant rise in retail trade after disappointing May figures reported 0.1% growth, revised down from earlier estimates of 0.3%.

Food store sales bounced back by 0.7% in June following a fall of 0.4% the previous month, as the good weather and promotions boosted activity.

But despite the positive figures, food sales volumes are still down 2.6% compared to pre-pandemic levels recorded in February 2020.

The non-food store sales figure jumped up by 1% in June after a 0.5% decline in May.

The biggest upward contributor was from department store sales which grew 1.9% as the warm weather coaxed Brits back to the high street, with retailers seeing increased footfall in the month. Sales in art galleries also lifted.

Household goods stores revealed a 1.4% hike in sales, with furniture stores benefitting from sale promotions. However, clothing store sales declined by 0.4%, 1.5% below the pre-Covid level.

Non-store retailing saw a rise of 0.2% in June, but this was slower than May’s 2.4% increase.

Meanwhile, online spending fell by 0.5% because of a monthly fall in sales for clothing and food. Fuel sales also fell 0.3% in June 2023, following a rise of 1.7% in the previous month.

Interest rates may curb spending

Despite the positive news from the ONS, further base rate hikes could hit consumer spending.

Ashley Webb, UK economist at Capital Economics, said: “The further increase in retail sales volumes in June suggests the recent resilience in economic activity hasn’t yet faded.

“But our view that interest rates will rise further, from 5% now to a peak of 5.5%, suggest that it’s too soon to conclude that the rebound in retail sales will be sustained and that the economy will avoid a recession.

“With the full drag on activity from higher interest rates yet to be felt, we still think the economy will tip into recession in the second half of this year and real consumer spending will fall by 0.5% from its peak to its trough.”

Jonathan Moyes, head of investment research at Wealth Club, said: “Retail sales in June came in much stronger than expected, this is despite fears of soaring mortgage costs and stubborn inflation dominating the news flow over the month.

“It appears that warm weather drove consumers onto the high street in search of new clothing and garden furniture over the month.

“While the picture may look rosy now, as the months grow colder, there is a risk the chill of higher mortgage costs and inflation will weigh heavy on household budgets.

“The big question is how much longer can the consumer hold out? Is this the last hurrah of summer spending before the cost-of-living squeeze really begins to really bite, or is the consumer in a stronger financial position than many predict?”