For many retailers, hopes were raised that the launch of the 2014 World Cup, in combination with the warm weather experienced across the majority of the UK in recent weeks, would equate to a huge increase in consumer spending in June. However, if recent data released by the CBI is anything to go by, June in fact brought the greatest stagnation in UK sales seen for many months and marked an end to the consecutive months of strong growth seen in 2014 so far.
According to the industry body’s report, sales growth slowed to a seven month low in June, with clothing and grocery retailers particularly struggling to attract customers to their stores. This is particularly disappointing as, although recent trends have noted a marked decrease in consumer interest for food purchases, the clothing category managed to rebound strongly in May – so this drop only a month later will surely have an impact on the confidence of fashion brands such as New Look, Topshop and River Island.
Panel leader at the CBI and senior executive at Asda, Barry Williams, believes that the still contentious issue of slow wage growth may lie at the root of June’s poor performance. However, he is confident that sales growth will increase as the year progresses due to improvements in the country’s inflation rate.
He says; “After a recent improved run for the high street, a fall in clothing and food sales has contributed to a disappointing month.
“Whilst it seems that hopes that retail spending would be boosted by a strong performance by England at the World Cup were as over ambitious as aspirations for a good performance, I’m reassured that consumer confidence is still on the up, as household budgets are being bolstered by falling inflation.”
The survey’s findings, based on the feedback of 133 retailers and wholesalers nationwide, showed that only 29 per cent of respondents believed their sales to be higher than those of June 2013. Meanwhile, 24 per cent of respondents believed them to be lower, with the resulting positive balance of just 4 per cent significantly less than the 29 per cent predicted by analysts at the beginning of the month.
As a result, the survey also found that most retailers surveyed had lowered their expectations for July, with the index falling to a five month low. The one exception to this rule is outdoor and DIY retailers however, as the home improvements boom continues to have a beneficial impact upon the UK retail sector.
IHS Global Insights economist Howard Archer agrees with Mr Williams’ assessment of the situation with regards to the impact of slow wage growth on retail recovery.
He says; “The loss of momentum in retail sales in June indicated by the CBI does raise question marks as to how strong consumer spending can be until earnings growth picks up appreciably.”
Although the retail industry has taken remarkable steps towards recovery this year, this report will surely raise concerns that consumer spending has “plateaued” as a result of low wage growth.
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