MNI REALITY CHECK: Online Boost To Drive UK July Sales Growth

UK retail sales increased modestly in July, according to industry leaders, with supermarket sales continuing to rise, albeit at a slower pace than earlier in the summer. City economists forecast a 2.0% gain in July, a long way shy of the record-high 13.9% surge in June.

However, some experts warned that the re-opening of eating and drinking establishments on July 4 may have diverted spending from shops to bars and restaurants.

"We noticed a 10% dip between [the last week of June and that first week of July] as people could spend on other stuff," said Andy Mulcahy, strategy director at the internet retail organisation IMRG.

Internet sales continue to be the driver of sales, although seemingly slowing from June's levels. as sales growth slowed, rising by an annual rate of 28% in July, down from the near-34% pace recorded in May and June. With high street retailers continuing to reopen through July, the share of internet sales could continue to slide from the record-high 33.3% of all sales touched in May

PUBS OPEN

Supermarket sales continued to rise, even as the pace of activity slows from the frenzied buying in the spring. Alcohol sales through supermarkets jumped by an annual rate of 41%, according to Kantar Worldpanel, despite the re-opening of bars.

The reopening of pubs and restaurants "brought people out, but it didn't result in extra sales in shops … Footfall in general is up, but remains 30% below normal levels. People aren't buying clothes, at least not in shops," Andrew Goodacre, Chief Executive at the Independent Retailers said.

Susan Barratt, CEO at IGD, also pointed to a return to a degree of normalcy. "Food and grocery sales slowed notably in July, signalling a move towards more normal or pre-lockdown shopper behaviour. Alcohol sales are still contributing significantly to growth for supermarkets, but less so than in May and June," she said.

NON-FOOD SALES SLOW

Non-food grocery sales have slowed considerably, with healthcare and household products increasing only modestly. Clothing and footwear sales remain extremely weak, with retailers reporting just a slight increase in July over a very low base.

"It's great to see retail sales stabilise this month, but this doesn't tell the whole story. This crisis has created winners and losers within the retail sector and for some businesses the picture remains bleak,' according to Rain Newton Smith, chief economist at the CBI.

Helen Dickson at the British Retail Consortium said although many shops continued to struggle with footfall down sharply. "Many people are still reluctant to go out, and fewer impulse purchases. The strongest performance came form food, furniture and homeware," she noted.

Some retailers have reported that shoppers have become more comfortable in undertaking longer journeys to reach shops, raising the prospect of a higher-than-expected increase in petrol sales (which comprise 10.4% of all sales) following a 21.5% jump in June. However, fuel sales were nearly 30% lower last month than during the same period a year earlier.

"As lockdown restrictions are gradually eased and non-essential retail outlets reopen, some consumers are slowly resuming their pre-Covid routines and shopping habits … however, we are clearly a long way off a complete return to normal," said Fraser McKevitt at Kantar.

Paul Martin, head of retail at KPMG, underlined Dickson's view. "The release of pent up demand continued in July, with total retail sales growing at 3.2% compared to the same month of 2019. Fortunes were heavily polarised though, and fashion sales continued to suffer despite the summer weather," he told MNI