Shoppers in the UK spent more in July than analysts expected, figures showed on Tuesday, but spending growth has still not matched inflation.
The strong performance, which outpaced consumer spending before the pandemic, offered a modicum of good news in a period that analysts say will be incredibly difficult for the UK economy.
Helen Dickinson, chief executive of the British Retail Consortium, or BRC, said the extra spending was due to increased demand for summer clothes, electric fans and picnic baskets triggered by unusually hot weather, which makes it a unique situation.
“Consumer confidence remains low, and rising interest rates, coupled with talk of the recession, will do little to improve the situation,” the Financial Times quoted the journalist as saying.
She added that energy bill hikes expected in the fall will further increase disposable income and mean that “consumers and retailers will be on a rocky road through 2022.”
The BRC compiled the consumer spending data in conjunction with KPMG.
They found UK retail sales growth in July was 2.3% higher than a year earlier and 10.6% higher than July 2019.
However, they warned that inflation had driven prices up, so people might have spent more money buying the same amount of goods.
Consumer price inflation hit 9.4% in June and is expected to reach 13% by December, the Bank of England warned last week as it warned of an impending recession.
Payments company Barclaycard also released data on the UK economy on Tuesday, suggesting UK consumers were more interested in spending money on fun than buying products in July.
Jose Carvalho, head of consumer products at Barclaycard Reporting, told the Financial Times that families actually became more optimistic about their finances in July.
“Britons (were) increasing their discretionary spending on entertainment, travel and takeaway,” he said.
Barclaycard looked at around half of UK credit and debit card transactions to find spending was 7.7% higher in July than in July 2021. Again growth has not kept pace the rate of inflation.
With inflation high and bills rising faster than pay rises, pressure is mounting on Prime Minister Boris Johnson to introduce tax and spending measures to ease the so-called cost of living crisis.
However, Downing Street on Tuesday ruled out short-term action, with Johnson’s spokesman saying ‘by convention it is not for this Prime Minister to make any major budgetary interventions during’ the period between his resignation and appointment. of a new Prime Minister.
Tony Danker, chief executive of the Confederation of British Industry, told Radio 4’s Today program that Johnson and the two people vying to replace him should meet and agree what additional support the government should offer to the UK’s most vulnerable people.