The Office for National Statistics ("ONS") has released its first official statistics tracking consumer behaviour since the result of the referendum was announced. Consumers have spent an estimated £29.6 billion pounds in the four-week reporting period, far exceeding all predictions for performance on the high street and online.
With most predicting a crash in consumer confidence and spending following the “Vote Leave” result, the latest set of statistics to be released has been a welcome surprise to retailers. Sales had risen by 1.4% in July after a 0.9% drop in June, according to the latest figures released by ONS. Economists, in a Reuters’ poll, had predicted a 0.2% increase; the official figures show a much stronger performance by retailers, indicating greater confidence from consumers.
Compared with quantity sales of July 2015, it is estimated that sales increased by 5.9% (volume) this year. Growth was experienced in all sectors; however, the main contribution came from non-food stores. Spending in the retail sector increased by 3.6% compared with July 2015.
The fall of the pound, following the referendum result, has attracted tourist-shopping trips, in order to take advantage of superior exchange rates. Holidays in the UK are now significantly cheaper for overseas visitors. In particular, sales in the luxury goods sector have been strong. Watches and jewellery sales were up 16.6% on the previous year.
This supports evidence that the “Vote Leave” result has had a limited impact on the UK economy in the short term. Fears of a recession in the latter part of the year should be assuaged by the strong performance from retailers during July. In the short term, this is very good news for retailers in general and the high street in particular. However, heavy discounting will have contributed to the higher spending by consumers. Once the discounting has ended, rising high street prices could be off-putting for consumers in the later parts of the year.
In addition, the introduction of the new national minimum wage may put pressure on retailers to try to make up this deficit elsewhere, namely in the cost of products. This could further compound the issue of rising prices and prove off-putting for consumers.
This is a positive start to the post-Brexit retail performance. However, many external factors have influenced consumer spending in the last two months, not least the weak performance of the pound in the international currency market. The long-term impact on retailers will only become clear once the dust has settled. In the short term, this provides a much-needed cash-injection into the retail sector. In the long term, it is hoped that performances exceeding expectations and predictions can continue to be the norm.