As we arrive at the end of the week the UK economy has received a welcome boost.
Retail sales volumes are estimated to have risen by 0.6% in July 2025, following an increase of 0.3% in June 2025.
So a rise and more than expectations.
Investing.com — British retail sales increased more than expected in July…….The Office for National Statistics reported that sales volumes grew 0.6% from June, exceeding economists’ predictions of a 0.2% increase.
I have long thought that monthly predictions of Retail Sales are a mugs game as it is such an erratic number. That is added to these days by the performance and by that I mean lack of by the Office for National Statistics as we note this.
Previous data underwent significant corrections, with June’s monthly growth rate revised downward from 0.9% to 0.3%.
So now we are back where we thought we were and in a sense growth is er zero! Anyway let us park the ONS issues for the moment and remind ourselves that June and July produced growth after a poor May. On the current figures we see quite a drop in May of more than 1% as the index fell from 98.6 to 97.6.which leads to this.
The quantity of goods bought (volume) in retail sales is estimated to have fallen by 0.6% in the three months to July 2025 when compared with the three months to April 2025. This decline follows four months of consecutive three-month on three-month growth.
So this time around care is needed with the ersatz quarterly number because any half way decent number for August and we will look like we are flying.
What happened in July?
As you can see the switch to online continues apace.
Sales volumes from non-store retailers, which mainly includes online retailers, rose by 2.5% in July 2025. This puts sales volumes at their highest level since February 2022.
That is no surprise on a personal level as whilst there is no doubt a bias from me being a Londoner I see an extraordinary amount of deliveries. In terms of the detail we are told this.
Retailers suggested that good weather and events such as the Union of European Football Associations (UEFA) Women’s Euro 2025 tournament boosted sales.
Also it seems to be a clothing thing.
Non-food stores sales volumes – the total of department, clothing, household, and other non-food stores – rose by 0.6% over the month. This was mainly because of clothing stores rising by 2.5% over the month and 5.5% over the year. This was the largest annual rise since January 2023, putting sales volumes at their highest since June 2023. Retailer comments suggested the rise was because of new products being launched, alongside the continued good weather.
Presumably our official statisticians are guided to include this narrative.
The Met Office climate summaries reported that the UK had its fifth warmest July on record.
Finally we get more confirmation of the online trend plus a hint of some inflation.
Total spend – the sum of in-store and online sales – rose by 1.0% over the month. As a result, the proportion of sales made online rose from 27.5% in June 2025 to 27.8% in July 2025.
If sales rose by 1% and volumes by 0.6% then we get a back of the envelope inflation hint of 0.4% which is troubling as that would head towards an annual rate of 5%.
Seasonal Adjustment Problems
I have been arguing for some time now that there has been a problem in the seasonal adjustment in this area. Back on February 16th last year I posted this.
But returning to the swings between December and January it looks pretty clear to me that whatever the seasonal adjustment method is describing it is not reality.
That was in response to this.
Retail sales volumes (quantity bought) are estimated to have rebounded by 3.4% in January 2024, following a record fall of 3.3% in December 2023 (revised from a fall of 3.2%).
That looked pretty ridiculous to me and I have repeated that theme over time. Of course the official view was packed with denials which this morning has become this.
During our scheduled annual review of Retail sales seasonal adjustment, as part of our quality assurance, we identified a problem with a file used to adjust for our survey reference periods not aligning precisely with calendar months………At the headline level, the effect on the monthly, seasonally adjusted series was from January 2025 until May 2025, when some holiday effects and “phase shift” effects were not properly accounted for.
Or if you prefer the quote below is a confession that I was correct.
Alongside correcting this error, we have conducted a detailed annual review of our seasonal adjustment parameters and settings. Using the latest data, all seasonal adjustment factors have been fully reviewed and re-estimated.
In terms of the impact we are told this.
If you look at 2025 so far there are some quite extraordinary revisions here. April and May for example particularly stands out which points at problems with Easter. Below is what we were told at the time.
Retail sales volumes (quantity bought) are estimated to have fallen by 2.7% in May 2025, following a rise of 1.3% in April 2025.
That 1.3% rise in April is now a 0.1% fall and that 2.7% fall in May is now just over 1%. So whilst I welcome so refreshing honesty there is a big fundamental issue here of frankly systemic failure. I also note that the numbers from December 2023 and January 2024 have only been marginally revised with the actual figures no doubt being too embarrassing to publish.Whilst in overall terms the primary factor is the index level people will draw conclusions from those monthly swings which I do not believe existed.
House Prices
After looking at the Nationwide house price index at the start of the month we can see that the luck of the draw benefited the research student presenting the Bank of England morning meeting.
House prices increased by +0.3% in August, marking a third consecutive monthly rise
• Average property price now £299,331, edging up to a new record high
• Annual rate of growth eases slightly to +2.2% (down from +2.5% in July) ( The Halifax)
He or she might want to put their contract renewal in today after informing Governor Andrew Bailey that both Retail Sales and more importantly house prices have risen. A “well played Governor” would help too especially as everyone will independently decide to join in.
If they are really sharp they might like the recent retracement in the UK 30 year yield to the Governor’s performance in front of the Treasury Select Committee in Parliament. Actually it has been US data which has driven this but remember reality is not a central banking strength.
Comment
There is something of a Dune theme today and I am thinking of its the future is known and the past is uncertain byline because it is quite clear that the latter applies to UK Retail Sales. Whilst I welcome the new honesty it needs to be followed up by much deeper reform or we will be noting similar changes in future years. That is conformed by this.
Supermarkets had the largest contribution to headline correction and revision over the last 12 months, followed by mail-order retailers.
If there is a category I would expect too know what is happening daily and indeed hourly it is supermarkets. Also remember how they want to put this data into the inflation figures?!
As to the numbers themselves then there is hope for the third quarter from the June and July figures.
Retail sales data are used to estimate growth of the retail trade (excluding motor vehicles and motorcycles) industry in the output measure of gross domestic product (GDP). The retail trade industry has a GDP industry weight of 4.8%.
So let us cross our fingers for August.
