The Retail Note - Retail sales: World Cup winning?

Key Messages

• Another bumper month for retail sales in June
• YoY retail sales values +7.1%, volumes +5.4%
• 2^nd consecutive month of stellar growth
• MoM volume growth of +1.0%
• Eclipsing economist consensus forecasts (-0.3%)
• Warm weather the key driver
• Shop price inflation declines from 2.2% to 1.7%
• Q2 YoY value growth +6.3%, volumes +4.1%
• Significant acceleration on a decent Q1
• YoY grocery spend +3.4%, volumes +1.2%
• YoY non-food spend +7.8%, volumes +6.0%
• Strong month for PCs & Telecomms, Cosmetics, Jewellers, Furniture
• Soft demand for Textiles, Chemists, Footwear
• Online sales +2.8% MoM, +14.4% YoY
• Online penetration increases by +50bps to 29.4%
• No impact on consumer demand from war in Middle East
• World Cup impact unproven but myth perpetuated
• Currently levels of growth unlikely to be sustaine
• But a slowdown will not constitute a meltdown.

I got it wrong. But not nearly as wrong as the economist community. I didn’t think June’s retail sales figures could in any way live up to the highs we witnessed in May. They did. And some. Economists predicted that they would be terrible, clinging slavishly to the notions of a cost-of-living crisis, squeezed real household income, war in the Middle East and inflation narrative, rather than just looking at the weather – it was the second warmest June on record.

A month, a quarter, a half-year that even the most diehard optimist couldn’t have predicted.

June – an undoubted triumph in isolation

No early media reporting on the retail sales figures is usually good news – and these figures are conspicuous by their absence on most media channels. The media are only interested in bad news or stories that fit their wider narrative. Today’s figures do not tick either of these two boxes.

The usual riders: by far the most meaningful figures are the year-on-year ones that exclude fuel. Retail sales values (exc fuel) were up +7.1% year-on-year in June, while volumes (exc fuel) were up +5.4%. In the latter case, this marked an acceleration on the stellar performance reported in May (+4.9%) while values were on par (+7.1%). But in both cases, May’s figures were revised upwards. In simple terms, May was even better than originally reported - and June topped that.

The far less meaningful (read, meaningless) but widely-reported ‘headline’ month-on-month numbers were likewise positive. For what they are worth, estimated month-on-month retail sales volumes also defied expectations and were up +1.0%. As the ONS eruditely puts it: ‘Retail sales volumes are estimated to have risen by +1.0% in June 2026. This followed a rise of +1.2% in May 2026 (unrevised from our previous bulletin), and a fall of -0.7% in April 2026 (revised up from a -1.0% fall in our previous bulletin)’.

Economist consensus forecasts were of a -0.3% decline in month-on-month volumes. Cue a refrain of “it won’t last” rather than an acknowledgement of “we got it spectacularly wrong, yet again”.

Inflation – still coming down

Nor has the anticipated spike in inflation materialised in the wake of events in the Middle East. Headline CPI figures that came out earlier in the week showed that the headline rate had declined from 2.8% to 2.6% in June.

A consistent direction of travel in the retail sales figures, but lower figures. Implied shop price inflation was just 1.7% in June, down from 2.2% in May. Grocery (2.2%) remains slightly higher than Non-food (1.0%). Unsurprisingly, the only category to be highly inflationary was Fuel (19.2%), with Jewellery (9.7%) the only other category to be approaching double digits (but, interestingly, this did not stymie demand – quite the opposite).

At the same time, many retail categories are actually deflationary, including PCs & Telecomms (-2.8%), Footwear (-1.4%), Furniture (-1.3%), Sports & Games (-1.3%), Electricals (-0.9%) and Textiles (-0.9%).

Two takeaways: firstly, rising oil prices have yet to filter through to shop prices, the notion that retailers would simply respond to higher operating costs by passing on price hikes to consumers has simply not happened. Secondly, and more importantly, retail sales are not just being propped up by inflation – quite the opposite. Sustained volume growth is a more than decent barometer of the strength of underlying consumer demand, completely in contradiction to the cost-of-living crisis narrative.

Q2/2026 HY

One month in isolation doesn’t tell the full story – the June figures also provide telling context of both Q2 and the full half-year.

Positive movement on virtually all counts. A duff month followed by a couple of corkers resulted in a strong performance in Q2 overall. Retail sales values (exc fuel) were up +6.3% YoY in Q2, with volumes ahead by +4.1%. In both cases, this marked strong acceleration on very decent Q1 figures (values +4.7%, volumes +3.1%).

The far less meaningful QoQ figures majored on by the ONS were also positive, but maybe downplayed the overall robustness of performance. “The quantity of goods bought (volume) in retail sales is estimated to have risen by +0.6% in Quarter 2 (Apr to June) 2026 compared with Quarter 1 (Jan to Mar) 2026. Non-store retailers' sales volumes rose, which was reported to be caused by a combination of warm weather and sales promotions over May and June 2026. Non-food stores' sales volumes grew in Quarter 2, with increasing sales in both computer and telecoms retailers, and department stores.’

So, retail sales values up around +5.6% in the first half of the year, volumes up around +3.6%. Not bad considering everything that is going on in the world and far higher than anyone would have predicted at the beginning of the year.

Performance by sub-sector

Usual variation in monthly performance by sub-sector – and particularly strong growth in online.

Grocery sales grew +3.4% year-on-year and more encouragingly still, volumes were up by +1.2%. Buried deep in the data, but the historic grocery figures over the last 12 months have been subject to considerable upwards revision. I previously questioned monthly figures that consistently showed volume declines. The latest figures show that grocery has been in positive volume growth territory in every month this year, bar one (March).

Higher headline growth in Non-food (YoY values +7.6%, volumes +6.8%), but a contrasting picture across the various sub-sectors. PCs & Telecoms (values +47.3%, volumes +50.1%), Cosmetics (+23.7%, +20.6%), Jewellery (+20.7%, +11.0%) and Furniture (+13.2%, +14.5%) all enjoyed double digit YoY growth, telling in that none are subsectors readily associated with a cost-of-living crisis. Clothing continued its strong run (+8.2%, +7.9%).

The usual suspects at the other end of the performance, but with less severe declines than in previous months. More challenged sectors again included Textiles (-5.7%, -5.0%), Footwear (-2.4%, -1.0%), Chemists (-1.4%, -3.5%), and Music & Video (-0.5%, -6.2%).

The weather undoubtedly won out as the single most influential factor in the June figures. This was reflected in the strong performance of online. Online sales grew MoM by +2.8% and by +14.4% YoY. Accordingly, online penetration increased by +50bps from 28.9% to 29.4%, the highest level since the end of the post-COVID rebase.

Those still looking to do the retail sales figures down will inevitably latch onto this as evidence that online was the only beneficiary of recent consumer buoyancy and that it entirely passed the high street by. Very much old-school thinking that we strongly challenge in our recent Retail Renaissance Paper #1: Death of Online? Paper. In essence, online is merely a channel of distribution within a wider retail ecosystem, more complementary to physical stores than it is competitive. Subject to both seasonal and weather-induced swings. The last month has certainly proved this.

For more detail, please refer to our accompanying Retail Sales Dashboard.

Where do we go from here?

I’m guessing that if these retail sales figures are picked up in the media the positivity will largely be attributed to the World Cup. A nice story, but one that is unlikely to hold much water. But the myth of major sporting events having a singificant impact on consumer demand is likely to perpetuated regardless. Like it or not, the weather is always the single most dominant factor in one month’s outturn.

“It can’t last” – the economist refrain. It has to date this year. And half the year has gone. No, it can’t last in that monthly growth of 7%+ in value terms and 5% in ‘real’/volume terms cannot be sustained indefinitely. A lower monthly run rate of 3%+ in values and 2%+ in volumes would still represent a decent result. A slowdown yes, but by no means a meltdown.

Football sadly didn’t quite come home. But retail sales certainly have. I didn’t predict a MoM sales rise in June. But I did have Spain down to win the World Cup. One out of two ain’t bad. And I’m more than happy to be wrong about the other.

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