UK Retail Sales Rose in June

Retail sales are 9% above pre-virus levels, and this was helped by a 0.5% increase in June. The headline numbers look good, however, if you take out fuel and food, most of the other categories saw spending decline. Whats does this tell us?

​Could this be down to the spread of the Delata variant? The jury is still out on this but its easy to think that this will probably have an impact. Consumer confidence may take a dip when comes to going out shopping if the fear of COVID-19 once again takes hold, but that doesn't seem to be playing out right now. According to a weekly ONS survey, the proportion of adults visiting a shop for non-essentials is noticeably higher now than it was at the end of May with strady footfall numbers.

So what we could be seeing is a degree of rebalancing with more spending moving towards services and away from retail goods. Its also worth noting that spending on fashion was down a bit in June, but still higher than it was at any point in the pandemic before shops reopened in April. 

Looking forward, what is on the radar for the retail sector? It's looking steady but there is the potential for some stronger headwinds with Delta and other new variants. If the Delta wave subsides, which the modelling data suggests should be happening around this time, and indeed, the actual data suggests that cases are declining, then the future is looking brighter.

There is plenty of demand and consumers may have more savings to spend. Whether they actually do spend it is another matter. Those savings are more heavily concentrated in the higher earners who are less likely to spend. Low income earners may have seen savings fall during the pandemic and with furlough schemes ending in autumn with possible redundancies, there is a possiblility that this could impact the high street and retail sales.

In summary, we could see incremental gains in retail sales through the rest of the year, which will contribute to the overall GDP number. We may see more rebalancing as services get back into full swing but all of this is predicated on the Delta wave fizzling out into autumn.