How does UK retail sales growth compare to the rest of Europe?

The ONS will publish July’s delayed retail sales on Friday, which should give us a glimpse of whether the momentum we were seeing at the start of the year has returned. As I wrote about last month, some economists will be hoping the “quality assurance” work the ONS has done can rectify what they see as shortcomings in the data. 

It’s easy to focus solely on the UK when looking at statistics like these, without considering whether the trends are part of a wider global picture. Unfortunately, in this case, taking that broader look only reinforces the concern: as the ONS data suggests, UK retail sales volumes have been pretty middling for the past few years.

In the chart below, you can see how seasonally adjusted retail sales volumes have changed in 15 major European economies since January 2020 or before the Covid-19 pandemic. That massive plunge you can see in early 2020 is Covid, while after that, there is a lot of noise.

The inflation crisis across 2021 and 2022 did a bit of a number on most, with 10 out of the 15 seeing lower volumes at the end of 2022 than at the beginning of the year (Remember, these numbers are seasonally adjusted, so that means big sales drives like Christmas are smoothed out of the numbers, so all months are comparable).

As things stand, ten out of the 15 now have higher sales volumes than they did pre-pandemic. The UK is one of the five that do not. Only Finland and Italy are still trending lower than Blighty. 

The standout performers here though, are Poland and Romania. Poland, where economic growth is robust and disposable incomes continue to increase significantly. The country’s prime minister Donald Tusk bullishly predicted last year that the Polish will be richer than the British by the end of this decade. 

To be fair, it was a point echoed by current prime minister Keir Starmer back in 2023 when leader of the opposition. He also said Romania, which has had the strongest post-pandemic recovery in retail sales in all of the major economies tracked, should be richer on current trends by 2040. The aggressive growth it has been seeing in retail sales has been moderating a bit in recent months. 

Even Germany, where GDP growth has been anaemic thanks to decreasing exports, is now trending above Covid numbers. It is not looking so rosy there at the moment, though, with the highest unemployment numbers in a decade. Retail sales in July also fell by 1.5%, much more than the 0.4% expected by analysts polled by Reuters. Competitive Brits might also be aghast to see how much stronger France’s post-pandemic recovery has been. 

There are some caveats here. All of these countries use similar-ish seasonal adjustment methodologies, but the quality of the data inputs and outputs will vary by country. But it remains important how they stack up against one another, given that these will be the statistics that economists in each country will be using to track the health of the economy.