UK | Staying bullish on the consumer outlook

Retail sales fell sharply in July, but we don’t see this as a reason to turn bearish on the consumer outlook. The slide was partly due to one-off factors and partly a reflection of spending patterns continuing to normalise as Covid restrictions, which had been limiting social consumption, are lifted.

What you will learn:

• The week’s other data suggested the outlook for consumer spending remains positive. The labour market continues to recover strongly, while there is still little evidence to suggest we are seeing the type of broad increase in price pressures that would be cause for concern.
• Last week’s national accounts release for Q2 had shown consumers at the forefront of the rebound in activity as the economy reopened after lockdown.
• While this week’s revelation that retail sales fell 2.5% m/m in July might suggest that the rebound is starting to run out of steam, we still see plenty of reasons for optimism on the consumer outlook.