In June, UK retail continued its strong start to the year, with surprisingly resilient sales, despite a weakening economic outlook. Unemployment dropped to a new 45-year low, however footfall and house price growth remained challenging.
Retail sales up in much-needed lift for economy
Retail sales were up by 4.1% in June as consumers increased their spend following a disappointing May. ‘Other stores’ continued to lead the way with year-on-year value and volume growth of 10.6% and 11.6% respectively, driven by a surge in demand for charity shop goods.
However, this did not translate into good news for the high street, with footfall continuing its downward trend, falling by 3.1% year-on-year. Yorkshire and the Humber and the East performed particularly poorly, with declines of 6.6% and 5.6% respectively. Reflecting the tough footfall conditions, department stores were the only subcategory with year-on-year sales declines.
Overall, while June was certainly a strong month for retailers, the weak economic outlook – along with renewed Sterling weakness, a new Prime Minister and continued Brexit uncertainties – means that numerous challenges remain on the horizon. Several businesses have already faced financial difficulty in 2019, with Bathstore one of the latest casualties and more are predicted to follow.
Record unemployment accelerates UK pay growth
There was good news from the latest UK job market figures, with the unemployment rate remaining at 3.8% – the lowest level since 1974.
In the three months to May, total real earnings, excluding bonuses, increased by 1.7% when compared to the same period last year. Driven by increased demand for labour, the growth rate is now at its highest level since September 2015.
This improvement goes against many expert warnings in the wake of Brexit uncertainties. Despite the current positivity though, GDP growth is forecast to slow down and, with a depreciating pound, cost inflation is expected to rise – which could hinder this trend.
House prices stagnant while credit growth continues to fall
The UK housing market remained stagnant in June, with year-on-year price growth falling to 0.5% – the slowest pace since February. The London property market remains particularly challenging, with house prices decreasing by 0.7% – the eighth consecutive quarter of decline.
Bank of England statistics showed unsecured borrowing had increased to £217 billion in May, reflecting year-on-year growth of 2.6% – considerably below the 6.2% growth rate seen twelve months ago.