(Alliance News) - UK retailers got a boost from last month's heatwave, with summer clothing and picnic food lifting sales in July, figures on Tuesday showed.
But weak consumer confidence and a recent interest rate hikes by the Bank of England, including its largest for nearly 30 years last week, could mean the rest of 2022 is "rocky" for both retailers and shoppers.
The latest British Retail Consortium-KPMG sales monitor showed retail sales increased 2.3% year-on-year in July. This snapped a streak of three successive sales declines. They had fallen 1.0% in June, 1.1% in May and 0.3% on April.
Growth compared to pre-pandemic times accelerated to 11% in July, hitting double-figures for the first time in 2022, from 8.8% in June.
"Sales improved in July as the heatwave boosted sales of hot weather essentials. Summer clothing, picnic treats, and electric fans all benefited from the record temperatures as consumers made the most of the sunshine. However, with inflation at over 9%, many retailers are still contending with falling sales volumes during what remains an incredibly difficult trading period," BRC Chief Executive Helen Dickinson commented.
Food sales rose 2.3% in the three months to July, outpacing the average 12-month increase of 0.6%. Non-food sales were 2.0% lower over the same period, outperforming the average 12-month
sales slide of 4.5%.
Dickinson added: "Consumer confidence remains weak, and the rise in interest rates coupled with talk of recession will do little to improve the situation. The Bank of England now expects inflation to reach over 13% in October when energy bills rise again, further tightening the screws on struggling households. This means that both consumers and retailers are in for a rocky road throughout the rest of 2022."
The BoE enacted its largest rate hike for almost 30 years on Thursday as it digs deep to combat inflation, which the bank forecasts to hit an annual rate of 13% this year.
The benchmark bank rate has been increased by half a percentage point to 1.75% from 1.25%. It was the biggest rate rise since 1995.
The BoE also dropped the bombshell that it expects to UK to fall into recession later this year.
KPMG Head of Retail Paul Martin said: "The sun came out for retailers in July, as like for like sales grew 1.6% on last year. Against a backdrop of the cost of living crisis and on-going reports of low consumer confidence actual sales are still holding up. Despite consumer polls suggesting confidence is at an all-time low, this hasn't translated to money not being spent at the tills, as consumers are determined to enjoy delayed holidays and an unrestricted summer.
"However, the summer could be the lull before the storm with conditions set to get tougher as consumers arrive back from summer breaks to holiday credit card bills, another energy price hike and rising interest rates. With stronger cost of living headwinds on the horizon, consumers will have to prioritise essentials, and discretionary product spending will come under pressure."
By Eric Cunha; ericcunha@alliancenews.com
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