UK retail sales bounced back in June, rising 0.9% month-on-month after a sharp 2.8% dip in May. Year-on-year, volumes grew by 1.7%, suggesting shoppers are back in the mood to spend – albeit cautiously. But according to Pantheon Macroeconomics’ chief UK economist Rob Wood, the picture isn’t quite so clear-cut.
“Unwarranted seasonal distortions had mostly unwound by June, making today’s print a cleaner read on the consumer. Cleaner, but not quite clean,” said Wood, who flagged the ONS’s seasonal adjustment as a source of recent volatility. He argues true sales growth likely dipped in April and rebounded in May more than the data implies.
Stripping out the noise, retail volumes have averaged a solid 0.2% monthly gain this year, and 0.3% since January, an encouraging sign for consumer momentum. Internet sales were strong in June, up 1.7% month-on-month and 4.6% year-on-year, while food sales and clothing posted more modest gains.
Looking ahead, Wood remains confident: “Retail sales should add 0.05pp (percentage points) to monthly GDP growth in June after cutting 0.14pp from May. GDP would likely have avoided falling in May if the ONS had better adjusted for Easter effects.” That’s enough, he said, to keep Pantheon’s Q2 GDP growth forecast at 0.2% quarter-on-quarter.