British Retailers See Slowest Sales Growth In 11 Months In July: Survey
A survey has indicated that British retailers experienced their slowest sales growth in 11 months during July, due to adverse weather conditions and elevated inflation.
The British Retail Consortium (BRC) reported that retail sales values increased by 1.5% compared to the same month the previous year. This growth rate is less than half of the 12-month average of 3.9% and is a decline from this year’s peak of 5.2% observed in February.
It’s important to note that the provided data is not adjusted for inflation. Consequently, the modest rise in spending during July actually signifies a decline in terms of sales volumes.
Although British consumers have largely withstood the impact of elevated inflation and rising interest rates thus far, economists predict that this resilience is likely to diminish in the upcoming months.
Wage growth, when adjusted for inflation, remains negative. Additionally, consumers are accumulating unsecured loans, including credit card debt.
Their financial situation is expected to tighten as borrowing rates, especially for mortgages, increase not only to account for past interest rate hikes but also to reflect anticipated future increases.
Consumers are evidently becoming more cautious with their spending.
Michael Hewson, Chief Markets Strategist at CMC Markets, noted that consumers are being selective about their expenses, prioritizing essential purchases in the face of continued Bank of England rate hikes affecting their incomes.
With many consumers nearing the end of fixed-rate mortgage terms, they might be increasing savings to buffer the potential impact of an imminent substantial rise in mortgage costs, Hewson added.
The Bank of England’s Chief Economist, Huw Pill, recently predicted that food inflation, which has been more severe compared to other items, could decrease to approximately 10% later this year from the current 17.3%.
The Bank of England raised interest rates on August 2, marking the 14th consecutive increase. It indicated that borrowing costs would remain elevated for a considerable period due to ongoing inflation.
However, market investors are now focusing on the weak economic outlook for the British retailers and are anticipating a maximum of two more rate hikes from the Bank of England, according to prevailing sentiments in money markets.