By Andy Bruce
According to surveys released on Tuesday, British consumer spending took a hit in June, primarily due to unfavorable weather conditions. This latest data adds to the recent indicators of the country's sluggish economic growth, which the new Labour government is aiming to revive.
Barclays reported a 0.6% decline in spending on its credit and debit cards in June compared to the same period last year, marking the first drop since February 2021. The bank attributed this decrease to the cool weather experienced at the beginning of the month.
Karen Johnson, Head of Retail at Barclays, emphasized the impact of unseasonable weather on consumer behavior, stating, "Once again, our data demonstrates the undeniable impact that unseasonable weather can have on consumer spending. The sluggish demand at the start of June even caused some fashion brands to adjust their sales schedules, although I was pleased to see that the situation has since improved with the arrival of sunnier days."
Similarly, the British Retail Consortium noted a 0.2% decline in sales values in June compared to a year earlier, following a 0.7% rise in May. These figures align with other indicators of slowing growth, including business surveys, after the economy rebounded in the first quarter following a recession in the second half of 2023.
Improving economic growth is the top priority for new Prime Minister Keir Starmer, whose Labour Party secured a significant victory in parliamentary elections on July 4.
While the recent data paints a picture of a weak month for consumer spending, Barclays' chief UK economist Jack Meaning remains optimistic about the outlook for the second half of the year. He stated, "While June’s data suggests a weak month, the view looking ahead to the second half of the year, as we see it, is one of falling interest rates, growing real incomes, and increasing confidence among consumers to spend and businesses to invest."
Accounting firm KPMG, the sponsor of the BRC's retail sales survey, acknowledged that the economic environment is improving but noted that many retailers are still facing challenges. Retail sales volumes, excluding petrol, are still slightly below their pre-pandemic levels based on official data.
Analysis:
The recent contraction in British consumer spending can be attributed to unfavorable weather conditions in June, as reported by Barclays and the British Retail Consortium. This decline, coupled with other signs of slowing growth, reflects the challenges facing the country's economy. However, there is optimism for the future, with expectations of falling interest rates, growing incomes, and increased consumer confidence. Prime Minister Keir Starmer's focus on boosting economic growth will be crucial in driving recovery. Retailers, though facing struggles, are operating in an improving economic environment. Overall, the data highlights the importance of monitoring consumer spending trends and economic indicators for informed financial decision-making.