After months of sluggish performance, signs of life are emerging on the British High Street.
- Sales volumes increased by 2.9% in May, surpassing economists’ expectations.
- Consumer confidence is on the rise, partially due to wages outgrowing prices.
- Larger retailers outperformed smaller ones, with clothing and footwear seeing significant gains.
- Mixed economic data leaves room for cautious optimism moving forward.
May witnessed a notable 2.9% rise in sales volumes, a sharp contrast to the previous month’s 1.8% decline. This figure not only defied economists’ expectations of 1.5% growth but also marked the first positive year-on-year sales increase in three months. However, broader context indicates sales still lag behind 2021 levels, highlighting the cautious nature of this recovery.
Recent data from the Office for National Statistics (ONS) revealed a reduction in the retail workforce, dipping below 3 million from 3.1 million in 2019. Despite warmer weather enticing shoppers back to the high street, the sector hasn’t fully rebounded. Larger retailers outshone smaller counterparts, particularly in clothing and footwear sales, driven by improved weather conditions.
Kris Hamer from the British Retail Consortium observed that broad-based recovery benefitted not just clothing but also furniture and household goods. The upcoming Euro 2024 is expected to boost spending further, particularly in snacks, alcohol, and TVs, contingent on England’s performance, which remains uncertain given recent matches.
The economic landscape remains mixed. The Purchasing Managers Index (PMI) composite dipped to 51.7 in June from 53 in May, indicating a slowdown in growth. While manufacturing showed improvement, the dominant services sector lagged. Despite these challenges, there are modest signs of optimism, particularly with wages outpacing inflation and boosting consumer confidence.
Market researchers GfK reported their highest consumer confidence index since November 2021, escalating by three points to -14. Broker Shore Capital suggested that this aligns with their narrative of better times ahead for consumer discretionary goods. Moreover, Bank of England agents reported a pickup in consumer demand in Q2 2024, suggesting a positive trend for the high street.
While challenges remain, there are promising signs that the High Street may be on the path to recovery.