Rajeev Shaunak, Head of Consumer, MHA, comments on July’s ONS retail sales figures:

“The modest fall in July’s ONS retail sales figures although expected after a positive May and June will make uncomfortable reading for the sector, although there will be some comfort in the improved consumer confidence numbers released overnight.

“Some of that early summer sunshine and football boost has extended into July, especially for picnics, picky bits, barbecues and summer clothing. But as sales still fell overall, it would suggest households are still cautious.

“Consumers are not necessarily shutting their wallets altogether, but they are becoming more selective. They may still spend on low-cost treats, value ranges and essential summer purchases, but bigger-ticket items such as furniture, footwear and technology are likely to remain firmly on hold. The hot weather also impacted footfall to many high street retailers as did a natural drop off from the sales promotions in June.

“The stronger GfK Consumer Confidence reading, released today, reinforces that ambiguous picture. There is wider confidence underpinned by warm weather, England’s World Cup run, temporary VAT relief across parts of leisure and hospitality and the early ‘Burnham Bounce’, but there remain deeper concerns about household finances.

“Inflation is the key pressure point. With CPI back up to 2.9% and further increases expected, households remain worried about food, energy and everyday bills. Even where grocery inflation has eased, shoppers are still looking for promotions, price cuts and value ranges to make budgets stretch further.

“For retailers, the squeeze is coming from both sides. Demand is fragile, but operating costs continue to rise, from labour and energy to business rates and regulation. Supermarkets and retailers have worked hard to shield shoppers from price rises, but that becomes harder when margins are already under pressure.

“The summer feel-good factor has not been enough to offset cost-of-living concerns. Until real incomes strengthen and inflation eases more convincingly, retail spending is likely to remain cautious, uneven and under pressure.”