UK retail sales rise despite cost of living crisis | Merchandise trade

UK retail sales rose unexpectedly in July as consumers continued to spend despite concerns over the cost of living crisis.

The Office for National Statistics said sales volume rose 0.3% in the month, following a revised 0.2% fall in June, with a series of online sales promotions helping to buck a wider trend of falling spending.

Despite the increase in headline sales, spending on bigger-ticket clothing and household goods continued to fall as consumers cut back amid concerns over affordability and the cost of living.

The figures come as households across the country come under pressure from inflation which has hit its highest level in 40 years.

Separate figures showed rising inflation boosted government borrowing by more than expected in July, underscoring the challenges facing Conservative leader Liz Truss’s tax cut plans.

The latest snapshot of retail sales highlighted the risk of an economic downturn, showing sales volumes for clothing stores fell 1.2% in July as shoppers tightened their belts amid concerns about the cost of living.

Sales volume in household stores fell by 0.4%, mainly due to declines in furniture and lighting stores.

Grocery store volumes rose by just 0.1% in July, up from monthly growth of 2.7% in June as the Queen’s Jubilee celebrations boosted sales.

Kien Tan, director of retail strategy at PwC, said online promotions such as Amazon’s Prime Day event had contributed to the surprise growth in headline sales volumes last month. “Almost every other retail category continued to decline,” he said.

“With the prospect of more inflation ahead, the concern for retailers is that shoppers will simply have less to spend as the nights draw in.”

The ONS said public sector borrowing was £4.9 billion in July, a month when government finances are usually in surplus due to self-assessed income tax revenue flowing into the Treasury.

The figure was £800m lower than the same month last year, when the coronavirus pandemic affected public finances, but was significantly higher than the £200m deficit forecast by the Office for Budget Responsibility.

The chancellor, Nadhim Zahawi, said the government would provide support to households affected by soaring living costs. “I know that rising inflation creates challenges for families and businesses, and it also puts pressure on the public finances by pushing up the amount we spend on debt interest.”

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