British consumer spending increased in July, but this was mainly due to inflation rather than growth in demand.
Warm weather at the beginning of the month boosted clothing sales, but this growth did not continue.
The British Retail Consortium (BRC) reported that spending in monetary terms rose by 2.5% compared to July last year, which is 3.1% less than in June. Clothing sales rose by 4.2%, which is the largest increase since September last year. Food prices rose by 3.9%, while other goods rose by 1.4%.
Economic context
“The rise in food inflation meant that the increase in spending was more a result of price rises than an improvement in demand,” BRC Chief Executive Helen Dickinson said.
The Bank of England (BoE) forecasts that consumer price inflation will rise to 4% in September, double the 2% target. Food price inflation will peak at 5.5% by the end of the year.
According to the BoE, the price increases are partly due to the rise in the minimum wage and higher employer contributions to national insurance.
