Did flaming June help take the heat off retailers?
11th July 2023 09:07
by Myron Jobson from interactive investor
interactive investor comments on the latest ONS Labour Market data and BRC Shop Price Index.
Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “The labour market has become less tight in recent months, with the unemployment rate ticking higher and vacancies falling to their lowest since mid-2021. There is a sense that many employers are reining in their recruitment on concerns over the UK’s economic picture, and as high inflation and rising borrowing costs continue to pummel profitability.
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“However, pay packets continue to grow, with wages excluding bonuses hitting their joint highest growth rate on record, which is a headache for the Bank of England amid its ongoing battle to tame stubbornly high inflation. While high pay awards help ease the cost-of-living squeeze on household finances, they can fuel the inflation beast as businesses could opt to pass the increase in labour cost on to customers by raising the prices of goods and services.
“The hope, as Bank of England Governor Andrew Bailey hinted in his speech at Mansion House last night, is that the fall in the cost of wholesale energy will lower the cost burden for businesses, which should eventually push inflation lower. However, strong employment and wage growth could result in even more interest rate pain for borrowers.”
BRC Shop Price Index
Myron Jobson says: “Britain's hottest June since modern records [began] provided a much-needed shot in the arm for retailers suffering from a cost-of-living induced malaise in sales volumes.
“Despite the squeeze on household budgets, many Britons splashed out on new clothing, swimwear, outdoor furniture and barbecue food to make the most of the warm weather.
“However, BRC’s data is not adjusted for inflation, so last month's increase in spending still reflects a fall in the volume of goods purchased. The stark reality is many shoppers are running on empty, and as inflation continues to run hot, shoppers face hard choices over how to spend their money. More and more of us are having to stretch our budgets to keep on top of rising prices, with little to spare for nice-to-have quality of life boosting purchases.
“Despite recent falls, food prices remain uncomfortably high for many, especially for those on a low income who spend a greater share of their money on food. With many of us opting against receiving receipts at self-checkouts, it is difficult to keep track of price rises – and supermarkets aren’t likely to shout about upping prices. As such, it remains important to actively review your budget and make necessary changes to maintain financial resilience.”
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