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Retail sales rebound in UK in July amid falling inflation, improved consumer confidence
(MENAFN) British retail sales experienced a modest recovery in July, rising by 0.5 percent after a disappointing June that was partly attributed to unusually poor weather conditions, which had dampened economic growth. The latest figures, released on Friday, aligned with economists' expectations, as a poll had predicted the same 0.5 percent month-on-month increase. This rebound in retail activity suggests that the pressure on British consumers from the high inflation of 2022 and 2023 is beginning to ease. Notably, inflation returned to the bank of England's 2 percent target in May and June, slightly exceeding that in July, while wage growth outpaced inflation at its widest margin since mid-2021 during the second quarter, providing some relief to consumers.
In response to the changing economic landscape, the Bank of England made its first interest rate cut this month after maintaining rates at their highest levels in 16 years. This move reflects an effort to balance the economic recovery with the need to keep inflation in check. Additionally, consumer sentiment in the UK has shown signs of improvement, with an index measuring consumer confidence reaching its highest level in nearly three years. Shoppers reported feeling more financially secure and expressed a greater willingness to make significant purchases, indicating a shift towards a more optimistic outlook.
However, the retail sector's recovery is not uniform, with recent reports from UK retailers painting a mixed picture. While clothing retailer Next exceeded expectations with strong second-quarter sales and subsequently raised its full-year profit forecast, luxury brand Burberry issued a profit warning, highlighting continued low consumer confidence in the luxury goods market. This divergence underscores the varying impacts of economic conditions on different segments of the retail market, with some areas benefiting from improved consumer confidence, while others, particularly in the luxury sector, continue to face challenges.
In response to the changing economic landscape, the Bank of England made its first interest rate cut this month after maintaining rates at their highest levels in 16 years. This move reflects an effort to balance the economic recovery with the need to keep inflation in check. Additionally, consumer sentiment in the UK has shown signs of improvement, with an index measuring consumer confidence reaching its highest level in nearly three years. Shoppers reported feeling more financially secure and expressed a greater willingness to make significant purchases, indicating a shift towards a more optimistic outlook.
However, the retail sector's recovery is not uniform, with recent reports from UK retailers painting a mixed picture. While clothing retailer Next exceeded expectations with strong second-quarter sales and subsequently raised its full-year profit forecast, luxury brand Burberry issued a profit warning, highlighting continued low consumer confidence in the luxury goods market. This divergence underscores the varying impacts of economic conditions on different segments of the retail market, with some areas benefiting from improved consumer confidence, while others, particularly in the luxury sector, continue to face challenges.
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