Retail stocks received a welcome boost on Friday with news that July’s retail sales were above forecasts and above their pre-pandemic levels.
According to figures from the Office for National Statistics (ONS), retail sales volumes rose by 3.6% in July compared with June, better than consensus forecasts of a 2% increase, and were 3% above February’s level. By value, sales were 4.4% higher on the month.
Excluding fuel, volumes rose 2% between June and July while sales by value rose 2.6%. Food store sales were down 3.1% on the month while non-store (online) sales were down 2.1%. The good news was clothing store sales were up 11.9% on the month although they are still well below February’s levels.
Howard Archer, chief economic advisor to the EY Item Club, was encouraged by the data. ‘Consumer spending looks on course for a substantial rebound in the third quarter after contracting a record 23.1% quarter-on-quarter in the second quarter of this year.
‘The full opening up of the retail sector is unleashing pent-up demand, while the opening up of the hospitality sector and other consumer services from early July is further fuelling consumer spending’.
The ONS remains cautious on the full year outlook, however. ‘As we see unprecedented changes to the economy, the pandemic has also changed the shape of the retail industry. Despite total levels of sales increasing to slightly above pre-pandemic levels, not all retail sectors experienced this bounce back’.
The monthly fall in non-store sales comes after sharp growth in March, April and May, and may be the result of an increasing number of retail stores reopening, but online sales are still a huge 49% above pre-pandemic levels.
There was also positive news from survey firm GfK on UK consumer confidence, with figures showing consumers are more confident about their personal financial situation over the next year.
GfK’s Major Purchases Index also ticked higher, suggesting that despite fears over job losses confidence is improving.
Many consumers have taken advantage of the government’s Eat Out to Help Out initiative, and there are calls from the restaurant industry to extend the scheme into September.
Shares in Marks & Spencer (MKS) ticked up 0.9% to 110p while Frasers (FRAS) rose a further 1.8% to 353p, continuing its strong run after its interim results and full year outlook defied sceptics yesterday.
