The delayed arrival of warm summer weather led to a rebound in UK retail sales in July, according to industry data, even as shoppers continued to avoid large purchases amid the ongoing cost of living crisis.

Data from the British Retail Consortium (BRC) indicated a 0.5% year-on-year increase in total UK retail sales for July. This marked a recovery from June’s disappointing performance, where cooler weather had kept consumers away from high street spending.

In July, consumers purchased summer clothing and health and beauty products, preparing for outings and holidays. However, spending on furniture and household appliances saw a decline as financially stretched consumers prioritised essentials over big-ticket items.

The Bank of England cut interest rates last week for the first time since the COVID-19 pandemic, following a sharp drop in inflation to the 2% target in May and June. Despite this, prices remain significantly higher than four years ago.

Linda Ellett, UK head of consumer, retail and leisure at KPMG, commented: “Spending levels continue to be governed by whether households have been able to absorb the likes of mortgage and rent increases, or had to limit their spend elsewhere as a consequence. While summer staples, such as health, beauty, and gardening products have helped to drive retail sales growth both online and in-store in July, the upturn is likely much less than retailers were hoping for at this key time of the year.”

Additional data from Barclays revealed a 0.3% year-on-year decline in overall consumer card spending for July, as discretionary spending remained selective amid higher living costs. Barclays, which processes nearly 40% of UK credit and debit card transactions, also reported increased spending on health and beauty products due to the arrival of warmer weather and delayed summer sales, contributing to a modest retail recovery.

However, non-essential spending fell by 1.1%, with reductions in clothing, home improvements, and sports equipment purchases. Meanwhile, pubs and bars experienced a surge in spending as football fans gathered to watch England’s progress in the men’s Euro 2024 tournament. Despite losing to Spain, payments in pubs and bars almost tripled on 14 July, marking a 195.6% increase year-on-year, and making it the busiest Sunday for pubs in 2024 so far, with transaction volumes up 92.9% compared to the average Sunday.

In the service sector, the S&P Global UK services purchasing managers index (PMI) indicated a rise in demand in July at the fastest pace since May 2023. This survey, which excludes retail, is closely watched by the Bank of England and the Treasury for early economic indicators. The PMI rose to 52.5 in July from 52.1 in June, where any reading above 50.0 signals growth in private sector activity.

Joe Hayes, principal economist at S&P Global Market Intelligence, remarked: “With the general election period coming to an end at the start of July, survey data for last month showed the UK service sector enjoyed a modest rebound after a fairly subdued end to the second quarter. July’s accelerated expansion in sales activity crucially suggests business and consumer confidence has improved, and albeit only one month into the second half of 2024, the latest survey results bode well for a reasonable GDP growth in the third quarter.”