UK Retail Sales with a big decline in July


Retail Sales in the UK have seen a big decline for July, with a significant miss of estimates.

A much bigger than expected decline of -2.5% for headline sales (+0.4% exp, +0.5% in June)), with adjusted sales (ex fuel) declining by -2.4% (+0.3% exp, +0.3% in June).

However, the ONS data does show that headline sales are +5.8% higher compared to pre-pandemic levels from February 2020.


This has also pulled the year on year growth in retail sales sharply lower. Year on year headline sales are now just +2.4% (6.0% exp, +9.7% in June), whilst YoY adjusted sales are at +1.8% (+5.7% exp, +7.4% in June).

The big contributors to the monthly decline were:

  • A -1.5% fall in food store sales (after a big jump in June for the Euro 2020 championships)
  • A -4.4% decline in non-food store sales (mitigated by the fact that July is a traditional sale season for clothing).  


What does this mean?

Retail Sales have been strong and the chart shows they remain a big positive for the UK economy, even if they have pulled back slightly this month. A moderation of sales was expected in July and even if the decline is bigger than anticipated, it does not change too much.


Other data today

UK public borrowing has come in slightly lower than expected in July.

The UK Government was estimated to have borrowed £10.4bn in July (£10.8bn exp). This leaves public sector net debt at 98.8% of GDP.

 

Initial Market Reaction

The retail sales data has hit GBP slightly. A decline was forecast but has been larger than expected, hitting sterling:

  • GBP/USD -10 pips
  • EUR/GBP +5 pips