Rainy weather dampens UK retail sales

July volumes fell 1.2% as wet days led to a High Street washout, but online sales volume rose

Street scene in the rain on Whitechapel High Street in London, United Kingdom. UK retail sales volumes fell 1.2% in July, as bad weather kept shoppers away (photo by Mike Kemp/In Pictures via Getty Images)Show less

Britain's wet summer dampened the mood of consumers on the country's high streets, new figures show.

Retail sales volumes in the UK are estimated to have fallen by 1.2 per cent in July following a rise of 0.6 per cent in the previous month, according to the Office for National Statistics.

Economists has been expecting a fall of 0.5 per cent.

Sales volumes at food stores fell by 2.6 per cent, with supermarkets indicating that the cost-of-living crisis and high food price inflation were continuing to have an effect on sales volumes.

“It was a particularly bad month for supermarkets as the summer washout combined with the increased cost of living meant sluggish sales for both clothing and food,” said Heather Bovill, deputy director for surveys and economic indicators at the ONS.

“Department store and household goods sales also dropped significantly.”

The proportion of online retail sales in the UK increased in July, as shoppers stayed indoors out of the rain. PA

Online boost

The poor weather made online shopping more attractive, where sales volumes rose by 2.8 per cent in July.

Indeed, promotions and the bad weather meant that 27.4 per cent of retail sales took online in July, up from 26 per cent in June. The July figures was the highest proportion since February 2022, when 28 per cent of sales were online.

“The wet weather did mean a good month for online retailing, as discounting plus consumers shopping from the comfort of their homes boosted sales,” Ms Bovill said.

Unable to sell as much stock as expected in July, some retailers now face with the prospect of discounting their surpluses.

“The offshoot of a slower July trading could leave a high stock surplus. And, potentially squeeze margins further as retailers look to offload stock in the future,” said Jason Tooley, vice president at Informatica.

“Markdowns and promotional efforts could help, but do not act as a long-term solution as they risk longer term margin erosion.”

A sale in a London store. UK retail sales volumes fell 1.2 per cent in July, more than economists expected. Getty Images

But, according to industry body the British Retail Consortium most retailers remain cautiously optimistic.

“Retailers are hopeful that the coming months will provide a boost to spending, as England fans celebrate the Women’s World Cup Final this weekend, families start their back-to-school shopping and university students ready themselves for the new academic year,” said Helen Dickinson, the BRC's chief executive.

“Nonetheless, the economic backdrop will remain difficult, and government must find ways to create an environment that fosters economic growth.”

Governor of the Bank of England Andrew Bailey and his Monetary Policy Committee's next decision on interest rates is in late September. EPA

Interest rates

The weak retail sales figures come at the end of a mixed bag of numbers for the UK economy.

Strong wage growth figures were followed by a drop in headline inflation, but a core Consumer Price Index reading that refused to budge from the June number, despite the 14 consecutive rises in interest rates.

It casts some confusion over exactly what the Bank of England's Monetary Policy Committee September decision on interest rates will be.

“The mix of strong wages data, stubborn core CPI but weak spending figures does not make next month’s monetary policy decision any easier,” said Stuart Cole, chief macro economist at Equiti Capital.

“But it is the CPI numbers that ultimately drive monetary policy decisions and while today’s spending figures are disappointing.

"There are enough good reasons for the Bank of England to look through them and continue to focus on its main concerns of too-strong wages growth and inflationary pressures that have permeated into all corners of the economy.”

“Accordingly, today’s [retail sales] numbers are unlikely to materially impact September’s decision.”