Retail sales experienced a slight decrease of 0.1% in the second quarter compared to the first, contributing minimally to GDP growth.
Rob Wood, chief UK economist at Pantheon Macroeconomics, maintains his forecast for GDP growth in the second quarter at 0.6%, while the Bank of England anticipates a slightly lower figure of 0.5%. This is due to stronger consumer spending on services and business-to-business expenditures supporting output. Wood stated:
The weather's shift towards inclement conditions in June likely impacted consumers' spending habits. With rainfall reaching a level 24% below the average, contrasting with May's above-average figures, alongside a cooler temperature of 0.2 degrees below seasonal norms, this may have influenced retail sales decline in June.
Retail sales demonstrate notable volatility throughout the year due to various factors such as weather conditions and measurement issues. This volatility can obscure the underlying trend. Although May's figures showed strong retail volumes growth, they were not exceptional; current retail volumes indicate a steady increase in line with improving real income growth, necessitating replacements for items like electronics and clothing amidst moderated goods inflation relative to services.
Charlie Huggins, of the investment firm Wealth Club, commented on June's sales figures:
Retail sales volumes in June were weaker than expected after a better-than-anticipated May report. This reflects the volatile monthly sales patterns witnessed since the start of the year, where weather and economic uncertainties contribute to fluctuations.
Consumer spending did not see significant activity in June across most categories (excluding fuel). However, it's essential to consider May's strong performance when evaluating recent figures. Sales volumes over the past three and six months remain relatively stable, indicating a consumer economy that is neither booming nor in distress but maintaining reasonable stability.
The volatility observed in monthly retail sales presents challenges in deciphering economic trends accurately. Despite June's underwhelming performance for the sector, several factors may signal potential recovery in the coming months, including moderating inflation rates, rising wages, and political certainty following recent elections.
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