Credit crunched consumers are not giving up their shopping habits, with the latest retail figures showing a surprise bounce in July.
Despite economists widely predicting a slowdown in retail sales, official statistics released this morning in fact reveal sales on the high street were much stronger than expected. In the three months to June, sales grew by 0.6%, but in the three months to July this increased to 0.7% growth.
On an annual basis, total retail sales were up 3.9% in July, with food shops reporting 2.2% growth and other outlets experiencing 4.3% growth.
Clothing and household goods sales help drive the growth.
Peter Newland, an economist at Lehman Brothers, says that retail statistics have been volatile for much of the year, with a surge of activity in May followed by a sharp slowdown in June.
He adds that despite the surprise growth in July, it will not be enough to prop up the flagging economy. Gross Domestic Product (GDP) figures are out at the end of this week, and experts largely expect that the economy has stopped growing and actually started to slow.
Newland says: “Today’s number does not change our view that GDP growth will turn negative in quarter three or that the Monetary Policy Committee will cut interest rates before the end of the year.”
The figures show that monthly sales have risen in all retail sectors except non-specialised stores and non-store retailing and repair.
Benjamin Williamson, an economist at the Centre for Economic Business Research, says the housing slowdown continues to hit sales in household goods stores.
He adds: "Looking forward, the slowdown [in retail sales] is likely to continue, perhaps gathering pace as the housing market slowdown and the high cost of living continues to hit consumer confidence.
"With inflation at its upper limit and a calmer picture for retail sales for July, interest rates are likely to remain on hold until the end of the year. Further storms down the line, however, could see interest rate expectations revised downwards."