Blog: Chris Brook-CarterThe smile returns to the UK high street - for now

Chris Brook-Carter | 29 July 2010

The sun on our backs, a World Cup to entertain us, so far the summer has proved a welcome tonic it seems to months of economic gloom and the belt tightening that has inevitably followed it. Consumers are finally returning to the UK high street.

Sales by the country's retailers increased in July compared with a year ago, and surpassed expectations, according to the latest CBI Distributive Trades Survey.

The CBI also expect sales growth to continue strongly next month.

The survey said that while 18% of retailers said that sales were lower than a year ago, 51% said they rose, giving a positive balance of 33%. This compares with an expected figure of +11% based on survey findings last month, and was the highest balance since April 2007 (+44%).

The sub-sectors with the strongest growth were grocers, clothing and footwear & leather.

Monthly figures like these have a habit of being misleading as they can be easily influenced by one-off events that hide a contrasting long-term trend - the sun and World Cup are a case in point.

But what's interesting this month are the expectations of retailers for August and the comparisons with years gone by.

Looking to August, a balance of +45% expects a higher volume of sales next month - the most positive figure since June 2004 (+46%).

The fact retailers remain so optimistic that strong sales growth will continue next month, despite concerns about the impact of public spending cuts and weak prospects for real take-home pay in the coming year, is encouraging.

It was not all good news though and the grand picture remains frustratingly hard to see. The wholesaling figures for one were less encouraging.

Comparing July with a year ago, 42% of wholesalers said the volume of trade was lower and 31% said it was higher, giving a balance of -11%. This was notably lower than the +26% figure expected last month. Wholesalers also expect the volume of sales next month to be lower than a year ago (a balance of -18%).

On top of that, figures out earlier this week show that job worries drove July US consumer confidence to its lowest since February, with one in six people expecting lower income in the next six months, underscoring the precarious state of economic recovery there.

The UK typically lags the US in the economic cycle, so the current relief for retailers may be short-lived.


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