U.K. retail sales unexpectedly surged in the month after Britain voted to quit the European Union, as hot weather bolstered sales of clothing and footwear and a drop in the pound encouraged tourists to snap up watches and jewelry.
The volume of goods sold in stores and online jumped 1.4 percent, after dropping 0.9 percent in June, figures from the Office for National Statistics showed on Thursday, exceeding a prediction of 0.1 percent. Sales excluding auto fuel advanced 1.5 percent.
The report suggests the economy started the third quarter on a strong footing, even after the Brexit referendum knocked confidence and prompted the Bank of England to revise down its growth forecasts. The ONS collected the data between July 3 and July 30, making this the first full report since the vote.
“This relative resilience in spending is not too surprising since the fundamentals — such as low interest rates, inflation and a strong jobs market — remain supportive,” said Ruth Gregory, an economist at Capital Economics in London. “But we would be wary about reading too much into the jump” because the figures can be volatile and the weather effect may prove temporary, she said.
Warm days and promotions at department stores helped propel sales in so-called non-specialized shops by 3.9 percent, the most since December 2013. Food sales were up 0.6 percent, after sliding 1 percent in June. Textiles, clothing and footwear increased 3.5 percent.
Visitor Splurge
“Better weather this year could be a major factor,” said Joe Grice, the ONS’s chief economic adviser. “There is also anecdotal evidence from respondents suggesting the weaker pound has encouraged overseas visitors to spend.”
The pound has dropped more than 12 percent against the dollar since the Brexit vote, making goods cheaper for overseas buyers. Sales of watches and jewelry climbed 3.1 percent on the month and 16.6 percent from a year earlier, the most since November 2014.
Sterling jumped 0.8 percent after the data, rising to $1.3152 at 9:37 a.m. London time.
Thursday’s data may provide a fillip to the outlook, with consumer spending being a key driver of growth since the financial crisis. Even with confidence slumping in the aftermath of the referendum, the British Retail Consortium said its gauge of retail sales rose the most in five months in July.
Still, some economists say it will take time for the full effects of the decision to leave the EU to be fully felt. The BOE unveiled a package of stimulus earlier this month to cushion any slowdown. The measures included cutting interest rates to a record low 0.25 percent and fresh asset purchases.
Measured by the deflator, prices at stores — including petrol stations — fell an annual 2 percent in July, marking the 25th month in which retailers cut prices.
