LONDON • Shoppers in Britain shrugged off June's shock Brexit vote as retail sales jumped by much more than expected last month, adding to signs that there has been little immediate hit for consumers.
Warm weather boosted clothes sales and the pound's plunge tempted overseas buyers to splash out on luxury items such as watches and jewellery, official data showed yesterday. These are the first official figures to shed light on consumer demand following the vote to leave the European Union in the June 23 referendum.
Data released earlier this week also showed little immediate impact of the Brexit vote on the labour market, but there were signs of inflation pressures building after the plunge in sterling, which could reduce the spending power of households.
Sentiment surveys had suggested concern, but actual sales volumes surged 1.4 per cent in July compared with June, the Office for National Statistics (ONS) said.
The pound rose half a cent against the US dollar and British gilt (bond) futures pared gains after the data release. "This positive surprise is encouraging for (third quarter) growth, but with consumer confidence having plunged in the wake of Brexit and business surveys suggesting growing caution, we doubt that it is sustainable," said Mr James Knightley, an economist at ING.
The ONS retail sales figures are volatile, and Bank of England (BOE) policymakers will want to see more than one month's data before drawing conclusions about consumer spending.
"Better weather this year could be a major factor, with sales of clothing and footwear doing particularly well," said Mr Joe Grice, chief economic adviser at the ONS. "There is also anecdotal evidence from respondents suggesting the weaker pound has encouraged overseas visitors to spend."
Sales of watches and jewellery were up 16.6 per cent in July compared with the same month last year - the biggest jump in nearly two years. Major retailers including Tesco, Next and John Lewis say they have not been affected so far by the referendum result.
The British Retail Consortium said spending in shops bounced back last month, with sales growth jumping to 5.9 per cent, the biggest rise since last September and far stronger than the 4.2 per cent forecast.
The BOE more than halved its forecasts for household spending over the next two years in light of the vote to leave the EU. It now expects growth in spending of 1 per cent and 0.75 per cent next year and 2018 respectively, as lower growth in wages and higher inflation eat into spending power.