The Office for National Statistics (ONS) revealed a significant rise in retail trade after disappointing May figures reported 0.1 per cent growth, revised down from earlier estimates of 0.3 per cent.
Food store sales bounced back by 0.7 per cent in June following a fall of 0.4 per cent the previous month, as the good weather and promotions boosted activity.
But despite the positive figures, food sales volumes are still down 2.6 per cent compared to pre-pandemic levels recorded in February 2020.
The non-food store sales figure jumped up by one per cent in June after a 0.5 per cent decline in May.
The biggest upward contributor was from department store sales which grew 1.9 per cent as the warm weather coaxed Brits back to the high street, with retailers seeing increased footfall in the month. Sales in art galleries also lifted.
Household goods stores revealed a 1.4 per cent hike in sales, with furniture stores benefitting from sale promotions. However, clothing store sales declined by 0.4 per cent, 1.5 per cent below the pre-Covid level.
Non-store retailing saw a rise of 0.2 per cent in June, but this was slower than May’s 2.4 per cent increase.
Meanwhile, online spending fell by 0.5 per cent because of a monthly fall in sales for clothing and food. Fuel sales also fell 0.3 per cent in June 2023, following a rise of 1.7 per cent in the previous month.
Interest rates may curb spending
Despite the positive news from the ONS, further base rate hikes could hit consumer spending.
Ashley Webb, UK economist at Capital Economics, said: “The further increase in retail sales volumes in June suggests the recent resilience in economic activity hasn’t yet faded.
“But our view that interest rates will rise further, from five per cent now to a peak of 5.5 per cent, suggest that it’s too soon to conclude that the rebound in retail sales will be sustained and that the economy will avoid a recession.
“With the full drag on activity from higher interest rates yet to be felt, we still think the economy will tip into recession in the second half of this year and real consumer spending will fall by 0.5 per cent from its peak to its trough.”
Jonathan Moyes, head of investment research at Wealth Club, said: “Retail sales in June came in much stronger than expected, this is despite fears of soaring mortgage costs and stubborn inflation dominating the news flow over the month.
“It appears that warm weather drove consumers onto the high street in search of new clothing and garden furniture over the month.
“While the picture may look rosy now, as the months grow colder, there is a risk the chill of higher mortgage costs and inflation will weigh heavy on household budgets.
“The big question is how much longer can the consumer hold out? Is this the last hurrah of summer spending before the cost-of-living squeeze really begins to really bite, or is the consumer in a stronger financial position than many predict?”
