UK Retail Sales Fall 0.5% in July After World Cup and Hot Weather Surge
Analysis of July Retail Sales and Market Reactions
By David Milliken
Retail Sales Performance in July
LONDON, Aug 21 (Reuters) - British retail sales fell back as expected in July after a surge in June when hot weather boosted demand for fans and air conditioners and supermarkets offered promotions alongside the men's soccer World Cup, official figures showed on Friday.
Retail sales volumes last month dropped 0.5% from June, in line with economists' median forecast in a Reuters poll, while annual sales growth slowed to 1.6% in July from a downwardly revised 3.8%, slightly below expectations for a fall to 2.2%.
Sector Breakdown: Clothing and Footwear
The biggest drag came from clothing and footwear sales, which fell by the most since May 2025, down 2.7% on the month, after many stores began summer sales in June rather than July.
Market Reaction
Sterling weakened slightly against the dollar after the data, which came alongside figures showing more government borrowing than expected in July.
Expert Insights and Consumer Sentiment
Economist Commentary
"July's 0.5% fall in UK retail sales volumes should probably be read as a pause rather than the start of a renewed consumer downturn," said Martin Beck, chief economist at WPI Strategy.
Consumer Sentiment and Government Response
Consumer sentiment surveys suggest demand has proven robust, despite higher energy costs caused by the U.S.-Iran war, offering a boost to new Prime Minister Andy Burnham, who has tried to mollify voter anger about the cost of living since taking office in July.
Government Policy Impact
Beck said the government's decision to remove value-added tax from household electricity bills from October was likely to boost demand later in the year, and that global energy prices looked less threatening than a few weeks ago.
Potential Risks
But there was a risk households could worry about the prospect of higher taxes in finance minister John Healey's October budget, he said, despite Burnham's pledge to stick with Labour's promise to keep the rates of all major taxes unchanged.
Consumer Confidence Index
GfK's long-running confidence indicator, released earlier on Friday, rose to a two-year high in August — its highest since just after Burnham's predecessor Keir Starmer came to power.
Retailer Performance Updates
Positive Results: Next
Recent updates from major British retailers have revealed mixed fortunes.
Clothing retailer Next edged up its annual profit outlook for the third time this year, with sales boosted by the country's prolonged period of hot weather.
Challenges: JD Sports
However, sportswear and fashion retailer JD Sports issued a profit warning, though it was weakness in U.S. markets, rather than in Britain, which prompted it.
(Reporting by David Milliken; Editing by Kate Holton and Sharon Singleton)
