Consumer Spending Plummeted Prior to Referendum
The latest data from the British Retail Consortium and KPMG shows growth in consumer spending for June was at its slowest pace since 2009.
The Retail Sales Monitor Report showed that sales in June this year were 0.5% lower than they were in June 2015 on a like-for-like basis, while total sales were 0.2% higher. The ‘like-for-like’ figure is balanced to account for the increase in actual retail capacity over the year. For comparison, in May this year, total sales were 1.4% higher than in April, or 0.5% higher on a like-for-like basis.
Overall, sales for the second quarter of 2016 were 0.5% higher than in the first quarter, and 1.2% higher than the second quarter of 2015 - reported to be the slowest annual rate of growth since May 2009.
However, while some commentators have blamed buyer caution in the run up to the referendum, the British Retail Consortium and KPMG insisted that poor weather was more likely to blame.
KPMG’s David McCorquodale said: “As consumer attention shifted indoors to escape autumnal downpours, furniture and home accessories bounced back in the month, with bigger-ticket items proving relatively resilient in the days immediately following the EU referendum.
“With May sunshine a distant memory, however, summer wardrobes remained bare as sales of women’s fashion and footwear plummeted following one of the wettest and dullest starts to a UK summer since records began.”
Looking forward, McCorquodale said, it is harder to tell which direction sales figures will go. On the one hand, there is the chance that consumer confidence generally will take a hit following the Brexit vote, and on the other, predicted improved weather could swing figures the other way.
He said: "While the ramifications from the Brexit vote may well affect consumer confidence, retailers will be hoping the long-promised heatwave and potential stay-at-home holidays will be enough to drive shoppers back to the high-streets.”
The British Retail Consortium’s chief executive, Helen Dickinson, said that while the effects of reduced consumer confidence will be noticeable fairly immediately (if indeed they come to fruition), other effects of the Brexit vote, from reduced value of the pound for example, will take longer to be seen.
She said: "Despite the fall in the pound, the time it takes for any input price increases to translate into higher shop prices will depend on a combination of factors including further changes in the pound, commodity prices and the challenge for retailers to move pricing given the intensity of competition.
"So there won't be any instant shocks as any changes would take time to feed through.”
Howard Archer of IHS Global Insights placed a lot of the blame for reduced consumer activity squarely on the referendum.
He said: “Consumer caution [in June] was fuelled by mounting uncertainty in the run up to the referendum, and then likely magnified by the vote for Brexit.”
Separate data from the British Chambers of Commerce also showed bad news for June. According to their survey, the number of manufacturers expecting an improvement in their turnover was at its lowest level for four years. However, they were also hesitant to blame the referendum, arguing that regardless of the outcome of the vote, the manufacturing and services sectors would have require salvaging.
The acting director general of the BCC, Adam Marshall, said: “Even before the EU referendum, both business confidence and economic growth were softening in many parts of the UK. Our latest survey results, captured just before the vote, suggest that many businesses have been operating in something of a holding pattern for some time.
“At a time of transition, all the businesses I speak to want Westminster to lead by example – by making bold decisions to progress key infrastructure and construction projects, by guaranteeing that EU workers can stay in British firms, and by seeking the best possible future terms of trade for the UK.”