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UK retail sales fell back last month as wet weather and persistent inflation hit sales volumes.

According to the Office of National Statistics, retail sales volumes dropped by 1.2% in July 2023, reversing the 0.6% rise in June.

In particular, food stores sales volumes fell by 2.6% in July 2023.

Supermarkets reported that some of the fall was because of the poor weather reducing summer clothing sales. However, food sales in supermarkets also fell back.

Retailers also indicated that the increased cost of living and food prices continued to affect sales volumes. Our Consumer price inflation, July 2023 bulletin reported that the price of food and non-alcoholic beverages increased by 14.9% in the 12 months to July.

Food store sales volumes were 5.1% below their pre-coronavirus February 2020 levels.

Non-food stores sales volumes also fell back by 1.7% in July 2023, following a rise of 0.6% in June 2023, with retailers reporting that the fall over the month was because of poor weather reducing footfall.

Automotive fuel stores sales volumes rose by 0.7% in July 2023, following a fall of 0.6% in June 2023.

Non-store retailing sales volumes rose by 2.8% in July 2023 as a range of promotions boosted sales.

Shoppers switching to online shopping because of poor weather and increased promotions led to 27.4% of retail sales taking place online in July, up from 26.0% in June, which was the highest proportion since February 2022 (28.0%).

Silvia Rindone, EY UK&I retail lead commented: “Despite a slow July, retailers should see sales improve in August as families start shopping for the start of the new school year in September. ‘Back to school’ is often the highest spending season in retail after Christmas.

“This year, retailers have had to remain vigilant of the economic factors affecting discretionary spending – factors that have changed on a monthly basis. This planning and agility will need to continue as consumers once again re-evaluate their spending habits. While there may be a temptation to keep prices elevated in order to recoup any losses from earlier in the year, this could hurt sales volumes as consumers cut back on non-essentials.”

Carly Donovan, associate partner at McKinsey & Company added: “Rather than spending at home, consumers were instead tempted to spend their increasingly squeezed disposable income on booking last-minute holidays, leaving less money for retail spending.

“With core inflation remaining unchanged at 6.9% consumers will need to carefully plan their spending, for both day-to-day and big-ticket items. And as retailers plan for the peak trading season of the year, many will be examining their pricing and promotional strategies with customer perceptions of value a key driver of retailer choice, particularly for grocery.”

Morning update

On the markets this morning, the FTSE 100 is down a further 0.7% to 7,256.7pts.

Early risers include Glanbia, up 3.2% to €14.92, Ocado, up 1.8% to 780.8p and McBride, up 1.7% to 39.5p.

Fallers include THG, down 5.5% to 91.1p, Wynnstay, down 2.7% to 401.3p and WH Smith, down 2% to 1,367p.

Yesterday in the City

The FTSE 100 suffered its fourth consecutive drop yesterday, falling a further 0.4% to 7,356.9pts.

Amongst the biggest grocery fallers were Ocado, down 5.5% to 767.4p, THG, down 3.4% to 96.3p, FeverTree, down 2.8% to 1,278p, Greggs, down 2.6% to 2,484p, Marks & Spencer, down 2.5% to 225.8p and Deliveroo, down 2.3% to 117p.

The day’s few risers included Kerry Group, up 2.4% to €86.93, Glanbia, up 1.8% to €14.46, Bakkavor, up 1.5% to 103p and Cranswick, up 0.3% to 3,262p.