Press release

20 Aug 2021 London, GB

Retail sales fell significantly in July – EY ITEM Club comments

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Annabel Banks

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Related topics Growth COVID-19
  • Retail sales fell significantly in July, due to June’s increase in food sales unwinding, the impact of people being told to self-isolate, and the continued normalisation of spending patterns as opportunities for social consumption increased.
  • The extent to which the retail sector outperforms the wider economy is likely to narrow further as we move through H2 2021 and spending patterns continue to normalise. But the strong backdrop for consumer spending is more consistent with a stabilisation in retail sales, rather than a further significant fall.

Martin Beck, senior economic advisor to the EY ITEM Club, says: 

“Retail sales fell by 2.5% month-on-month in July, although this still left sales 5.8% above their pre-pandemic level. The EY ITEM Club attributes July’s fall to three factors. First, June’s Euro 2020-related rise in sales in food stores unwound. Second, there is likely to have been some impact from the fact that the number of people told to self-isolate by the COVID-19 app in July was nearly three times the June total, constraining retail footfall. And third, with restrictions continuing to be relaxed, consumers will have spent more on social consumption at the expense of the retail sector. 

“Looking ahead, the normalisation of spending patterns is likely to remain a key theme. Increased opportunities for social consumption, and a high degree of pent-up demand for these services, points to consumers switching back to spending a higher proportion of their money in these areas, at the expense of the retail sector. But there is likely to be some mitigation from the fact that the broader environment for consumer spending is very positive, with restrictions on mobility having been lifted, household incomes more resilient, and some consumers sitting on large levels of ‘excess’ savings accumulated over the pandemic. 

“So, while the extent to which the retail sector outperforms the wider economy should narrow in H2 2021, the EY ITEM Club expects this to mean that retail sales stabilise, rather than continue to fall significantly.”