Online shoppers and Amazon Prime Day lift UK retail sales

Small rise confounds City forecasts as even troubled department stores record increase

Online spending bolstered UK retail sales last month, while department stores notched up their first increase this year, as consumers shrugged off Brexit fears.

The quantity of goods bought rose 0.2% in July, buoyed by the annual Amazon Prime Day, according to the Office for National Statistics. The figures wrong-footed City economists who had expected a 0.2% decline.

In the three months to July, retail sales rose by 0.5% when compared with the previous three months, down from 0.7% growth previously.

Rhian Murphy, the ONS head of retail sales, said increased only modestly in the past three months. “Although still declining across the quarter, there was an increase in sales for department stores in July for the first time this year,” she said. “Strong online sales growth on the month was driven by promotions.”

Non-store retailing, such as internet shopping and mail-order purchases, jumped by 6.9% last month, the biggest increase since May 2016. Amazonheld its Prime Day summer sale on 15 July and other retailers also offered price reductions.

The high street is being rocked by a long-term shift in shopping habits, as consumers increasingly shop online rather than visit local stores. One bright spot was the struggling department stores sector, where sales grew by 1.6% in July, ending six months of falls.

Elsewhere, the picture was less rosy. Food sales were flat, clothing and shoe shops recorded a 0.2% drop and household goods sellers suffered a 5.4% decline, reflecting the weaker housing market.

Samuel Tombs, the chief UK economist at the consultancy Pantheon Macroeconomics, said the figures demonstrated that consumers were not fazed by the Brexit deadline. Retail sales had also risen in June, by 1%.

“Granted, Amazon’s Prime Day, which the retailer has run every July since 2015, probably was chiefly responsible for the colossal 6.9% month-to-month rise in non-store sales, which made a 0.7 percentage-point contribution to growth in total sales,” he said.

“Sales volumes likely will fall back in August, given that some shoppers probably brought forward planned purchases to take advantage of the temporary discounts offered by Amazon. Nonetheless, we still think consumers can be relied upon to steady the ship.”

Others said consumer spending also got a lift from the heatwave in July, and were sceptical that consumers would keep spending as much, as the 31 October Brexit deadline moved closer.

Gabriella Dickens, the assistant economist at Capital Economics, predicted household spending would hold up as long as a no-deal Brexit could be avoided. “The outlook further ahead depends on what happens with Brexit. If there is a no deal Brexit, consumer spending growth would probably fall,” she said.