Heatwaves and football couldn’t sustain the high street.
UK retail sales in June revealed to be worse than expected
- The Office for National Statistics has released the latest UK retail sales figures, presenting disappointing numbers as sales drop 0.5% in June
- However, figures from April and May bolstered Q2 as the strongest set of quarterly figures since 2004
- Disappointing results are unlikely to negatively impact UK equity investors, claims analyst
The latest monthly retail sales figure was a surprising disappointment as June was a month of declines for the index; presenting declines of 0.5% whereas expectations were for a rise of 0.2%. Moreover, the annual rate fell from 4.1% to 2.9%.
The World Cup and the exceptionally warm weather supported food retailers as consumers purchased drinks and BBQs but shoppers stayed away from the high street as illustrated in the dent in sales for general retailers.
Meanwhile online shopping continued at a strong pace and kept its share of total retailing at 18%. However, with strong April and May figures, the June numbers were not poor enough to hamper this Q2 as it turned out to be the strongest set of quarterly figures since 2004.
But, the weak June figures compared to the previous month could also be partly explained by one-off factors and tough comparators such as the royal wedding and a bounce-back of shopping after the severe weather during March.
Today’s numbers, however, still paint a slightly mixed picture of the UK economy and consumer confidence. Recent data had suggested that the economy was bouncing back from the weak Q1, but yesterday’s relatively weak inflation figures and the June retail sales suggest that there will be more reason for certain policymakers in the Monetary Policy Committees to hold off on the August rate hike and take a ‘wait and see’ approach.
Indeed, the sterling has already taken a bashing from the Brexit news flow and only headed further south upon publication and breaching the $1.30 level. The pound’s fall has naturally resulted in a lift in UK equities, but any further drops in sterling will bring back some of the issues for companies we saw in the immediate aftermath of the referendum decision. Imports cost could be higher, feeding higher inflation while export demand could improve.
Overall though, we don’t think too much has changed for UK equity investors, any rate rises will be modest in pace and equity returns are still highly superior to cash alternatives.
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