Retail sales lost ground in July. A 1.2 percent monthly decline was more than twice the market consensus and more than reversed a slightly smaller revised 0.6 percent gain in June. This was the first fall since March and steep enough to reduce annual growth from minus 1.6 percent to minus 3.2 percent and leave volumes at a 4-month low. Very wet weather was probably a factor.

Excluding auto fuel, the picture was slightly worse with purchases down 1.4 percent versus June and 3.4 percent on the year.

July's monthly setback was led by food where sales declined 2.6 percent, matching their sharpest drop since January 2022. Non-food purchases, excluding auto fuel, were off 1.7 percent within which there were particularly marked declines in household goods (3.8 percent), non-specialised stores (2.9 percent) and textiles and clothing (2.2 percent). However, other stores saw a 0.7 percent rise and, elsewhere, non-store retailing advanced 2.8 percent and auto fuel 0.7 percent.

The latest data put overall volumes 0.8 percent below their average level in the second quarter and so provide early warning of a possible negative contribution from the retail sector to GDP growth. High, albeit falling inflation and rising interest rates inevitably boost the likelihood of a weak quarter. Still, the July report leaves both the UK ECDI (34) and ECDI-P (38) well in positive surprise territory showing that economic activity in general continues to outperform market expectations.

Retail sales in July are expected to fall 0.5 percent on the month following a 0.7 percent rise in June.

Retail sales measure the total receipts at stores that sell durable and nondurable goods. The data include all internet business whose primary function is retailing and also cover internet sales by other British retailers, such as online sales by supermarkets, department stores and catalogue companies. Headline UK retail sales are reported in volume, not cash, terms but are available in both forms. The data are derived from a monthly survey of 5,000 businesses in Great Britain. The sample represents the whole retail sector and includes the 900 largest retailers and a representative panel of smaller businesses, including internet sales. Collectively, all of these businesses cover approximately 90 percent of the retail industry in terms of turnover.

With consumer spending a large part of the economy, market players continually monitor spending patterns. The monthly retail sales report contains sales data in both pounds sterling and volume. UK retail sales data exclude auto sales.

The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

Retail sales not only give you a sense of the big picture, but also the trends among different types of retailers. Perhaps apparel sales are showing exceptional weakness but electronics sales are soaring. These trends from the retail sales data can help you spot specific investment opportunities, without having to wait for a company's quarterly or annual report.