UK retail sales continue recovery in August but growth slows down

UK retail sales extended their bounceback in August but saw the rate of recovery slip, according to the Office for National Statistics (ONS).Sales volumes were 4% up on February, prior to the pandemic, and saw a 0.8% increase on July’s figures – well down on the 3.6% growth recorded between June and July.

Retail sales were pushed up by the UK government’s ‘Eat Out To Help Out’ scheme

What do the numbers look like?

• The ONS data shows online retail sales were down by 2.5% in August relative to the previous month, although growth over the course of the pandemic means the sector is 46.8% up on February as a result of prior gains.

• Sales of household goods surged in August, with retailers reporting a near double-digit 9.9% increase in homeware sales as locked down consumers get the decorating bug.

• August’s retail sales volumes increase is rather less impressive than it first appears however, as the 0.8% growth pales against the 3.6% rise recorded in July.

Why does it matter?

• Retail sales serve as an economic bellwether, constituting the first official indication of GDP performance in August.

• The figures support the view that Britain is continuing down the path toward economic recovery this summer, boosted by initiatives such as Eat Out to Help Out.

• Making sense of the numbers Andrew Wishart of Capital Economics said: “Having already exceeded their pre-virus level in July, the further rise in retail sales in August shows the striking rebound of consumer spending after the crisis.“

• Lending credence to the stats, Wishart notes that this ‘chimes‘ with separate payments data from the Bank of England’s which ‘suggests that overall consumer spending may have already made a full recovery.‘

• Wishart adds that the retail rebound is particularly notable, as it coincides with the government-backed discount dining bonanza.

• Cautioning against unfettered optimism Wishart adds: “But spending may yet stutter as the furlough scheme is wound down and unemployment rises, weighing on household incomes and job security.“

• Wishart also notes that spending on other sectors of the economy, such as investment, is lagging well behind.

• As a consequence, Wishart doesn‘t expect GDP to recover to pre-virus levels until the early part of 2022 at the earliest.