UK retail sales unexpectedly surge in July, pound’s depreciation fuels consumer spending

Retail sales in the United Kingdom surged unexpectedly during the month of July, as depreciation in the domestic currency while the hot weather boosted consumer spending on clothing and footwear, post Britain’s vote to quit membership of the European Union.

The volume of goods sold in stores and online jumped 1.4 percent, after dropping 0.9 percent in June, figures released by the Office for National Statistics showed Thursday, exceeding a prediction of 0.1 percent in a Bloomberg survey. Sales excluding auto fuel advanced 1.5 percent.

Further, warm days and promotions at department stores helped propel sales in so-called non-specialized shops by 3.9 percent, the most since December 2013. Food sales were up 0.6 percent, after sliding 1 percent in June. Textiles, clothing and footwear increased 3.5 percent.

The pound has dropped more than 12 percent against the dollar since the Brexit vote, making goods cheaper for overseas buyers. Sales of watches and jewelry climbed 3.1 percent on the month and 16.6 percent from a year earlier, the most since Nov 2014.

Sales, excluding petrol, were also 5.4 per cent higher by volume than a year earlier in July. This followed a 3.9 per cent annual rise in June, when sales growth cooled significantly from 5.2 per cent in May. On the other hand, including petrol, sales rose 1.4 per cent month-on-month and 5.9 per cent year-on-year.

The recently released retail sales report suggests that the British economy had a strong footing at the entry of the third quarter despite the Brexit vote knocking down confidence that prompted the Bank of England to revise down its growth forecasts.

Meanwhile, the Bank of England this month cut interest rates to a fresh historic low of 0.25 percent and resumed quantitative easing as part of a broad stimulus package designed to protect the UK economy against a sharp shock following Britain’s vote to leave Europe.