Today's ONS UK retail sales data for June shows sales fell by 0.9% on the prior month, the sharpest decline in six months and 0.3 percentage points worse than predicted by economic forecasters. This reversed May's exceptional 0.9% increase and our view is that the wet weather during the month (some parts of the UK experienced near-record rainfall for June) was a key factor behind this poor performance.
Despite the disappointment, there are several positives to take from this data. Overall sales volumes increased 4.3% compared to June 2015, the 38th consecutive period of year-on-year growth. Department stores were the key winners, enjoying a 6.6% rise in annual volume growth, no doubt boosted by Euro 2016 and the Queen's 90th birthday celebrations. Online sales continue to be another bright spot, experiencing a year-on-year rise of 14.1% in the month, with this channel's share of total retail spend rising 1.6 percentage points to 14.2%. Homewares and department stores were two of the strongest performing online sub-sectors, whilst clothing & footwear retailers' sales fell 2.2% year-on-year.
In contrast, clothing stores had a shocking June (the weather would have played a key role in this), and 2016 is proving to be a nightmare for this sector , as demonstrated by the clothing results of both high street bell-weather's Next and M&S, so far this year.
This is the first set of consumer data post-Brexit but it would be unwise to rely upon it as an accurate barometer of consumer sentiment since much of it was collected before the referendum. Several data sets scheduled to be released over the next few months will provide a more considered assessment of consumer confidence following the referendum.
August's retail sales data will provide the first full month of retail spending post the event and the spotlight will be on the performance of sectors where big ticket items play a key role such as home improvement and electrical. September's new car registration data (being 'plate change' month) will also be a good indicator of consumer confidence. As the UK enters a new phase of uncertainty will consumers start to retrench and cut back on their expenditure, or will they continue to spend as they have been for much of the past two years?
Click here to view retails sales data for June.