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UK retail sales volumes jumped 1.0% mom in June, far exceeding expectations for a -0.3% mom decline, following an unrevised 1.2% mom increase in May. The stronger-than-expected performance points to resilient consumer demand despite elevated borrowing costs and persistent cost-of-living pressures. Retailers credited sales promotions and warm weather for boosting spending, particularly at online and clothing retailers.

The gains extended beyond the headline figure. Excluding automotive fuel, retail sales rose 1.1% mom, while volumes increased 1.2% qoq in Q2. Non-store retailing was the standout performer, with sales surging 4.4% mom and 3.8% qoq, reflecting strong online demand. Other non-food stores also posted solid gains, while clothing retailers rebounded 1.9% mom after recent weakness. Food sales edged higher, suggesting spending strength was relatively broad-based across consumer categories.

Fuel sales was the notable weak spot, falling -0.8% mom and 6.0% qoq as higher pump prices continued to weigh on demand following the Middle East-related stockpiling seen in March. Overall, the report suggests UK consumers remain willing to spend selectively when supported by discounts and seasonal factors, reinforcing the view that household consumption continues to provide a cushion for the economy.

Economic Data

Category Breakdown

Key Takeaways

• UK retail sales rose 1.0% mom in June, sharply beating expectations for a -0.3% decline.
• May's 1.2% mom gain was unrevised, while April was revised up to -0.7% mom from -1.0% mom.
• Excluding automotive fuel, retail sales increased 1.1% mom, indicating that the strength was broad-based rather than driven by volatile fuel sales.
• Retail sales volumes rose 0.6% in Q2 from Q1, or 1.2% excluding fuel, pointing to resilient household spending through the quarter.
• Online retailers were the standout performer, with non-store sales jumping 4.4% mom and 3.8% qoq, helped by sales promotions and warm weather.
• Clothing retailers rebounded 1.9% mom, while other non-food stores also posted solid gains.
• Fuel sales remained the weakest segment, falling -0.8% mom and -6.0% qoq after motorists cut back following March's conflict-driven stockpiling and subsequent rise in pump prices.
• The report suggests UK consumers continue to spend selectively despite high interest rates, reinforcing the resilience of domestic demand.

Full UK retail sales release here.

Germany's GfK Consumer Climate edged down from -29.3 to -29.6 for August, highlighting that household confidence remains deeply depressed despite modest improvement in some underlying indicators. The slight deterioration was driven by weaker income expectations and a renewed rise in precautionary saving, offsetting gains in willingness to buy and economic expectations.

Income expectations fell from -12.2 to -14.5, reversing part of the gradual improvement seen in recent months as households turned more pessimistic about their financial outlook over the coming year. Meanwhile, willingness to save rose from 13.9 to 17.0, remaining exceptionally high by historical standards and signaling that consumers continue to prioritize building financial buffers amid persistent uncertainty. Although willingness to buy improved from -13.4 to -9.9, it remained firmly negative, suggesting that households are still reluctant to commit to major purchases.

The survey also showed economic expectations improving for a third consecutive month, with the indicator rising from -8.7 to -6.3, indicating that pessimism about Germany's economy is gradually easing. However, consumers still expect economic conditions to worsen over the next year. At the same time, inflation concerns ticked higher following the expiration of the fuel subsidy at the end of June, with higher pump prices reinforcing caution.

Overall, the survey points to a consumer sector that remains constrained, suggesting household spending is unlikely to provide a meaningful boost to Germany's economic recovery in the near term.

Economic Data

Key Takeaways

• Consumer Climate edged down from -29.3 to -29.6, indicating German consumer confidence remains deeply subdued.
• Income expectations fell from -12.2 to -14.5, ending several months of gradual improvement.
• Willingness to save rose from 13.9 to 17.0, highlighting continued precautionary behaviour amid economic uncertainty.
• Willingness to buy improved from -13.4 to -9.9, but remained firmly negative, suggesting consumers are still reluctant to make major purchases.
• Economic expectations improved for a third consecutive month, with the index rising from -8.7 to -6.3, although most households still expect economic conditions to worsen over the next year.
• Inflation concerns increased modestly following the expiry of Germany's fuel subsidy, which pushed fuel prices higher.
• Overall, the survey points to weak household demand, suggesting private consumption is unlikely to become a major driver of Germany's economic recovery in the near term.

Full German Gfk consumer climate release here.

Japan's core consumer inflation accelerated in June, with the CPI excluding fresh food rising from 1.4% yoy to 1.6% yoy, matched expectations. Headline inflation also picked up from 1.5% yoy to 1.7% yoy. The figures point to firmer price pressures ahead of next week's Bank of Japan policy meeting, though both measures remained below the central bank's 2% target. Meanwhile, the core-core CPI, which strips out both fresh food and energy, eased from 1.8% yoy to 1.7% yoy, suggesting underlying inflation remained relatively contained despite the rebound in headline prices.

Food continued to be the main source of inflation. Prices excluding fresh food rose 3.1% from a year earlier, driven by higher raw material costs that lifted prices of processed foods such as bento meals and chocolates. By contrast, government subsidies aimed at cushioning households from higher fuel costs continued to suppress energy prices. Energy costs fell -0.1% yoy after declining -2.5% in May, with lower gasoline and electricity prices offsetting part of the upward pressure from global crude oil markets. Healthcare and household durable goods also contributed to the rise in consumer prices.

The June data are unlikely to alter expectations that the BoJ will keep its policy rate unchanged at next week's meeting after raising it to 1.00% in June. Instead, attention will center on the Bank's updated economic and inflation projections, particularly its assessment of the risks posed by rising oil prices and a weak Yen. With Brent crude at $100 and Japan heavily dependent on imported energy, today's inflation figures suggest the recent pickup in price growth has yet to fully reflect the potential impact of higher energy costs should government subsidies be scaled back or global oil prices continue climbing.

Economic Data

Key Takeaways

• Core inflation accelerated: CPI excluding fresh food rose from 1.4% to 1.6%, but stayed below BoJ's 2% target for a fifth consecutive month.
• Headline inflation also picked up: Headline CPI increased from 1.5% to 1.7%, reflecting firmer food and other consumer prices.
• Underlying inflation softened slightly: Core-core CPI eased from 1.8% to 1.7%, suggesting broader domestic price pressures have not reaccelerated.
• Food remained main driver: Food excluding fresh items rose 3.1%, though inflation slowed from 3.5%, as higher raw material costs continued to lift processed-food prices.
• Energy subsidies limited upside: Energy prices fell only 0.1%, narrowing sharply from May's 2.5% decline, but government support still restrained gasoline and electricity costs.
• Oil and Yen create upside risks: Brent near $100 and weak Yen could raise imported inflation later, particularly if government subsidies are reduced.
• BoJ likely to pause: Data should not alter expectations for rates to stay at 1.00% next week after June's hike.
• Outlook Report matters more: Markets will focus on how BoJ incorporates Middle East supply disruptions, higher oil and Yen weakness into new inflation forecasts.