UK shops report strong July sales thanks to hot weather but long-term outlook remains uncertain

Sales were above the norm for the time of year and retailers said they expect the expansion to continue at a similar pace into August

Food and clothing sales were particularly strong, the survey of 111 firms showed

UK retail sales picked up at a healthy pace in July thanks to hot weather, according to a new survey. Retailers had been predicting minimal growth as incomes are squeezed by rising inflation.

The Confederation of British Industry found that 48 per cent of retailers reported sales were up on the same month last year,while 26 per cent said they were down, giving a positive balance of 22 per cent.

Food and clothing sales were particularly strong, with positive balances of 34 per cent and 53 per cent respectively, the survey of 111 firms showed.

Sales were above the norm for the time of year and retailers said they expect the expansion to continue at a similar pace into August, the CBI said.

Though monthly survey data can be volatile, the latest figures reinforce positive numbers on Wednesday from market researcher Nielsen. It found that shoppers spent 5.1 per cent more on groceries during the four weeks to 15 July than during the same period in 2016 – marking the highest year-on-year increase in at least four years.

Separate data from Kantar Worldpanel chimed with those figures, showing a 3.9 per cent increase in sales for the 12 weeks to 16 July, also driven by fine weather.

The longer-term outlook appears less rosy, however. Inflation dipped slightly to 2.6 per cent in June, from 2.9 per cent in May, but price rises are once again outstripping wages.

Consumer spending has held up since last June’s Brexit vote, but much of that has been fuelled by a rapid expansion of credit card and loan debt.

Last month, the Bank of England warned lenders they must hold more levels of capital to shield them against potential losses from people who cannot pay back their debts.

Anna Leach, CBI head of economic intelligence, said: “The warm summer has added a sizzle to our high streets as shoppers defied expectations, with sales growth in clothing shops and grocers driving overall performance.

“But while retailers expect a similar pace of growth next month, the factors underpinning their sales growth are more shaky. Although employment is strong, real incomes are falling in the wake of higher inflation, and that’s expected to feed slower consumer spending growth ahead.”