Retail sales volumes in Great Britain rose 1.0 per cent in June, following a 1.2 per cent rise in May and a 0.7 per cent fall in April. Retailers told the Office for National Statistics that the reason was straightforward: sales promotions and warm weather.
Across the second quarter as a whole, volumes rose 0.6 per cent against the first quarter. That is growth, and after a weak April it is a genuine recovery in the quarter. It is also growth bought partly with discounting, which is a different thing from growth bought with demand.
Where the Growth Came From
The June bulletin, released on 24 July, is specific about which parts of retail moved.
Non-store retailers, a category mostly made up of online sellers but which also includes street stalls and markets, rose strongly in both May and June. Retailers reported that promotions and warm weather boosted sales of outdoor products and items such as fans.
Non-food stores grew across the quarter, with increases in computer and telecoms retailers and in department stores. Food retailers’ volumes also rose, again attributed to the combination of warm weather and promotions run over May and June. Online sales rose across most sectors over both the month and the three months to June.
That is a broad-based rise rather than one category carrying the number, which makes it more credible than a single-sector spike would be.
The Discount Question
The recurring word in the ONS commentary is promotions, and it appears alongside every category that grew.
Volume measures record how much was bought, not how much was earned. A retailer that shifts 10 per cent more units at a 15 per cent discount has grown its volumes and shrunk its margin, and the retail sales index will show only the first half of that.
This matters for reading the quarter. Sales volumes rising 0.6 per cent across a quarter in which promotions are repeatedly named as the driver is consistent with two quite different situations: consumers buying more because they feel better off, or retailers buying volume to clear stock. The volume series alone cannot distinguish them.
The weather explanation is more benign. Warm weather genuinely creates demand for specific goods, and the sale of fans and outdoor products is real incremental spending rather than displaced spending. But it is also weather, which does not recur to order.
Hospitality Went the Other Way on Price
The consumer picture in the same period contained one line moving against the trend. While overall CPI inflation fell to 2.6 per cent in the twelve months to June, restaurants and hotels inflation rose, from 4.2 per cent to 4.4 per cent.
That divergence tells you something about cost structures. Hospitality is labour intensive, energy intensive and property intensive, and all three of those cost lines have been rising faster than goods prices. A restaurant cannot import a cheaper version of its own dining room.
The practical consequence is a squeeze from both ends. Operators face input costs rising faster than the general price level, and they face customers whose real pay is barely growing. Passing costs through is the only option available, and doing so is precisely what shows up as 4.4 per cent inflation in the category.
What the Two Halves Mean Together
Retail volumes rising while hospitality prices rise faster than everything else describes a consumer economy where people are still spending but are getting more careful about where.
Discounted goods bought online, and outdoor items bought because it is hot, are low-commitment purchases. A restaurant meal at 4.4 per cent higher prices is a discretionary decision made under a real-terms pay increase of roughly nothing, which we covered when the labour market data showed real regular pay growing just 0.3 per cent.
Retailers with a discounting lever have used it and it has worked. Hospitality operators, whose costs are structural rather than stock-based, have less room to run the same play.
Online Keeps Taking the Growth
The persistent detail across this bulletin is that non-store retailing rose strongly in both May and June, and that online sales rose across most sectors over both the month and the quarter.
Non-store retailing is a wider category than online shopping alone, since it also captures street stalls and markets, but online is the large majority of it. Growth concentrated there has a specific implication for anyone operating physical premises.
A shop carries costs that a warehouse does not: rent set by location rather than by floor area alone, business rates calculated from a rateable value tied to that location, staffing across opening hours rather than across order volume, and fit-out. Those costs are largely fixed against turnover. When incremental demand goes to non-store sellers, the physical retailer keeps the cost base and loses the marginal sale.
That is not an argument for abandoning premises, which do things online cannot: they generate discovery, they carry the brand, and for a good deal of retail they remain where the purchase decision actually happens. It is an argument for knowing what proportion of a location’s cost is being carried by transactions that could occur anywhere.
The retailers that grew in this quarter were the ones positioned to capture demand however it arrived. A business with a shop and no meaningful online route captured only the share of the warm weather and the promotions that walked past its door.
Relief Is Coming, Slowly
There is help on the way for part of the sector, though the timing is awkward.
A 20 per cent business rates cut arrives for around 32,000 pubs, clubs and smaller live music venues, but not until April 2027, as we set out in our report on the rates and VAT package. Closer at hand, a temporary reduction cut VAT from 20 per cent to 5 per cent between 25 June and 1 September on eligible children’s meals, family entertainment tickets and attraction admission.
The second of those is live right now and ends within weeks. Operators inside its scope are in the final month of a materially better tax position on those specific lines, and the decision about what happens to prices on 1 September is one worth making deliberately rather than by default.
What to Watch
Three things will show whether June was a turn or a warm month.
The first is whether volume growth persists once promotional periods end. Growth that survives the withdrawal of discounting is demand. Growth that does not was inventory clearance.
The second is the restaurants and hotels inflation line. If it keeps rising while headline CPI falls, the gap between what hospitality costs to run and what the rest of the economy costs is widening, and that gap eventually closes through closures rather than through prices.
The third is the comparison base. April fell 0.7 per cent, which was itself revised up from a 1.0 per cent fall. Two strong months following a weak one is a recovery to a level, not necessarily a trend above it.
That revision is worth a note in its own right. April’s fall was initially reported as 1.0 per cent and has been restated as 0.7 per cent, a meaningful change to a monthly figure. The ONS cautions that monthly growth rates are volatile and should be used alongside the three-month measure rather than on their own, and the April revision demonstrates why. A business that reacted to the original April number by cutting orders was reacting to a figure that has since moved by three tenths of a percentage point.
For planning purposes the rolling three-month series is the more reliable of the two, and on that measure the direction through the second quarter was up. The monthly number makes the headline; the quarterly number is the one to budget against.
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