Retail sales data, July 2016 – Andy Lyon from PwC comments
In response to the latest retail sales data, Andy Lyon, partner and retail expert at PwC in the Midlands, commented:
“Retail sales fell back in June after their strong growth in April and May, in part due to wet weather in June depressing clothing sales.
However, monthly data are always volatile and the second quarter as a whole saw relatively robust retail sales volume growth of 1.6% relative to the first quarter, suggesting that consumers generally kept on spending in the months leading up to the EU referendum.
“The data also provided some indications that deflationary price pressures were easing on the high street, with no change in average store prices between May and June.
But high street competition remains fierce in sectors like clothing and groceries, and online retailers are making big inroads in the household goods sector, which saw internet sales rise by over 40% over the past year.
“The June data related mostly to the period before the EU referendum, so we will have to wait until next month to get the first official data on how the Brexit vote is affecting retail sales.
Based on consumer confidence surveys, we would expect some further moderation in the pace of sales growth over the coming months, but we would not expect a dramatic fall in consumer spending with employment rates at record highs and real earnings still rising.
The quick move by the Conservative Party to appoint a new Prime Minister and create a stable government should also have a positive impact.
“In the immediate aftermath of the vote to leave the EU, retailers are looking carefully at their currency exposures and weighing up the opportunities and threats.
Retailers in London are already seeing an uptick in demand as sales to tourists rise on the back of the fall in the pound.
We expect this trend to replicate across the East and West Midlands as well.
It should also be good news for UK suppliers as they become more competitive due to import prices rising, many of which are denominated in US dollars.
“Despite the uncertainty around Brexit, we are still finding overseas retailers looking to buy into the UK market, establish businesses to sell to UK customers, and set up European headquarters here.”