Why July retail mini boom may be as good as it gets

Fri, Aug 28, 2020

The surprise factor for the retail sector in the bounce back from Covid lockdown has been, for many outside the fashion sector at least, how good recent trading has been. Some, like electrical appliances retailer AO, have seen trends run in their favour right from the start. Others, like DFS, were initially affected by the closure of physical stores, but have since bounced back strongly.

ConsumerCast's overall spending figures for July show a stronger upturn (+9.6% for total retail sales) than even the ONS's figures (+2.7%) , mainly due to the stronger performance of food and drink, which is unacountably weak in the ONS retail sales data.

But the mini boom seen in July and possibly the first half of August, boosted by hot weather and pent up demand from consumers forced to stay in the UK by quarantine restrictions, is likely to be the best retail is going to get this year.

Why? The first reason is that consumers are starting to have other things to spend their money on, as leisure spend begins to recover, with the Chancellor of the Exchequer's Eat Out to Help Out scheme diverting money into the slowly recovering pub and restaurant sector.

The second is that the majority who have not seen a big negative hit to their incomes have saved like never before. April and May saw unprecedented net savings by households, but this tapered off in June and in July, according to ConsumerCast estimates, it virtually petered out. With spending moving more into line with incomes, households may, quite rightly treat this cash as a one-off windfall and save it.

Thirdly, despite significant support to household incomes from the UK government, pressures are likely to grow due to the tapering off of furlough payments and increasing job cuts. This will hit both spending power and confidence - the two things needed to keep the UK consumer economy afloat.

So, the advice to retailers is this: make the most of the current upturn in the fortunes of some in the sector, because it is very unlikely to last.


Top