Retail sales in Britain unexpectedly rose in July as consumers continued to spend despite concerns about the cost of living crisis.
The Office for National Statistics said sales volumes rose 0.3% in the month, following a revised 0.2% drop in June, with a variety of online sales promotions helping to buck a trend further large decrease in spending.
Despite the rise in overall sales, spending on more expensive clothing and home goods continued to fall as consumers cut spending amid concerns about affordability and cost of living.
The figures come as households across the country are pressured by inflation hitting its highest level in 40 years.
Separate figures showed rising inflation boosted government borrowing more than expected in July, underscoring challenges to Conservative leader Liz Truss’s tax-cut plans.
Highlighting the risk of an economic slowdown, the latest retail sales snapshot showed clothing store sales volumes fell 1.2% in July as shoppers tightened their belts amid concerns over the cost of living.
Sales volumes at home goods stores fell 0.4%, mainly due to declines in furniture and lighting stores.
Grocery store volumes increased by just 0.1% in July, compared with a 2.7% monthly growth rate in June, when the Queen’s jubilee celebrations boosted sales.
Kien Tan, director of retail strategy at PwC, said online promotions such as Amazon’s Prime Day event contributed to the surprise growth in core sales volumes last month. “Almost every other retail category continued to decline,” he said.
“With the prospect of higher inflation to come, the concern for retailers is that shoppers will simply have less to spend as the evening approaches.”
The ONS said public sector borrowing was £4.9bn in July, a month when government finances are typically in surplus due to self-assessed income tax receipts flowing into the treasury.
The figure was £800m lower than the same month a year earlier, when the coronavirus pandemic hit public finances, but was significantly higher than the £200m shortfall projected by the Office for Budget Responsibility.
Foreign Minister Nadhim Zahawi said the government will provide support to households affected by rising cost of living. “I know that rising inflation is creating challenges for families and businesses, and is also putting pressure on public finances by increasing the amount we spend on debt interest.”