British retail sales drop for the first time in three months

LONDON – British retail sales fell for the first time since April as scorching weather and fewer discounts discouraged shoppers and ended a recent rebound in consumer spending.

The total volume of goods sold in stores and online declined 0.5 per cent in July, partly reversing a downwardly revised 0.7 per cent increase the previous month, the Office for National Statistics said on Aug 21. July’s drop was in line with economist forecasts.

Sales at non-food stores and online retailers fell as earlier-than-usual promotions encouraged shoppers to bring purchases forward to June.

Sunny weather, the football World Cup and Prime Minister Andy Burnham’s cost-of-living announcements have lifted confidence this summer, with a GfK survey overnight showing that British consumers are more optimistic than at any point since August 2024.

However, that boost may be eclipsed by slower wage growth, higher energy bills and the risk of a broader inflationary shock from US President Donald Trump’s war in Iran. The sentiment boost during Burnham’s first weeks in office may also prove short-lived as he faces difficult trade-offs in his first budget this autumn.

“After an extended spell of warm weather across large parts of the UK, many households will already have bought what they need for the season, while lines of popular summer products come to an end,” Sandra Prince, head of consumer at Lloyds, said. “The boost from the World Cup that came to an end in the first half of July also meant fewer opportunities to capitalise on the warmer conditions.”

The drop in retail sales adds to signs that Britain’s brief period of more positive economic news is coming to an end. Inflation rose for the first time in four months to 2.9 per cent in July, while job vacancies declined to a five-year low, according to official figures released earlier this week. The Bank of England (BOE) expects price rises to accelerate further in the coming months as the impact of the Iran war feeds through.

The BOE is paying close attention to British consumers as it faces a trade-off between slow demand and inflationary pressures. So far, a weak jobs market has eased the risk of second-round effects.

The ONS said non-food sales fell 1.3 per cent in July, led by clothing stores. Clothing discounts were also less widespread than usual for the time of year.

Household goods and department store sales also fell, with retailers blaming the heat and stock shortages, while online sales declined after June promotions. Food stores bucked the trend, with retailers reporting a boost from the World Cup.

Consumers stayed away from shops to avoid extreme heat. England recorded its driest July since records began in 1836, while temperatures across Britain averaged more than 2 deg C above normal, according to the Met Office.

An earlier report from the British Retail Consortium showed retail sales rising just 1.3 per cent year on year in July, half the pace recorded a year earlier and slower than the 12-month average. Retailers said consumers prioritised small treats and postponed bigger purchases like furniture or electronics. Bloomberg