Brexit ‘not to blame’ for consumer confidence lows

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Latest statistics from the retail sales in June 2016 revealed a decline in consumer spending, but Brexit might not be to blame, according to one expert in retail and wholesale at accountancy firm Wilkins Kennedy LLP.

Compared with May 2016, the quantity bought in the retail industry is estimated to have decreased by 0.9%. Average store prices (including petrol stations) fell by 2.5% in June 2016 compared with June 2015. The amount spent in the retail industry decreased by 0.9% compared with May 2016, and increased by 1.5% compared with June 2015. However, the value of online sales increased by 14.1% in June 2016 compared with June 2015, and increased by 0.5% compared with May 2016.

As the vote to leave the European Union was announced, it would appear co-incidental that the quantity bought and the amount spent in the retail industry decreased compared to the previous month, Wilkins Kennedy notes. However, a closer look at the figures suggests that the amount spent in the sector actually increased compared to June 2015 and the value of online sales increased 0.5% on May 2016 and 14.1% from June 2015.

BrexitWilkins Kennedy LLP partner and head of retail and wholesale Phil Mullis commented: “Whilst the quantity bought in the retail industry dropped 0.9% compared to May 2016, the volume of retail sales in June 2016 is estimated to have increased by 4.3% compared with June 2015.

“It is far too early to tell if the Brexit vote has had an impact on consumer spending. Yes, there have been falls in spending in the grocery sector, for example, but that is far more likely to be due to the constant price squeezes in the supermarkets. In fact, there are still plenty of sectors reporting sales increases, including furniture, home accessories, household appliances and jewellery and watches.”

He added: “We could actually see a spike in spending in the short term, especially for bigger ticket items, as retailers are still selling existing stock at ‘old’ prices. Once these reserves run low, that’s when we could see consumers hesitating on purchases which could cost more due to currency volatility and increased fuel prices. Will retailers choose to pass on those increased costs to the customer or will they take a hit to profits?  Let’s see what July and beyond brings.”

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