After a very soft June, retail sales bounced back in July with a 4 per cent increase in spending on a year-over-year basis. Underlying volumes rose by 1.7 per cent.

This will come as a relief to those who feared a recession, although it adds to the confusion over what exactly is happening in the consumer economy. While the sales numbers are increasingly choppy, this is to be expected. Consumer finances remain soft, and this means shoppers are becoming more reactive and changeable. This in turn, creates mini ebbs and flows in performance.

The numbers from this month and last month are a case in point. Last month – which has been revised down – overall retail sales shrank by 0.1 per cent. This month they increased by 4 per cent. The swings are dramatic but averaged out they produce a 2 per cent year-over-year combined growth rate for June and July. This is about where we expect spending to be given the current state of the economy.

So why the swings? As we noted last month, June was uneventful with no major holidays or events. By comparison, July had plenty of activity, including the Independence Day holiday, Amazon’s Prime Day, and many other associated sales and discounting events. These things nudged a sluggish consumer into spending and splashing out. Basically, in this economy, the consumer needs to be chivvied along and given excuses and reasons to spend. July provided those things in abundance. It is also the case that some people delayed spending in June in anticipation of the bargains they might be able to snag in the July sales.

Now, there is a limit as to how much growth can be achieved, especially when the consumer remains under financial pressure. As such, it would be unreasonable to expect July’s performance to be the new normal. Indeed, with some back-to-school spending being pulled forward, the months ahead may be much weaker. However, the current numbers and pattern of trade suggest that, over this year as a whole, there will be reasonable growth. This is good news for retailers, even if the rollercoaster demand pattern makes planning much harder.

On a sector basis, it was a solid month for food and grocery stores where sales increased by 2.5 per cent or by 1.2 per cent in volume terms. Consumers splashing out for the Fourth of July was helpful, and grocers pulled out all the stops to offer bargains and deals, which helped drive up basket sizes and kept a lid on inflation. Apparel retailers also had a good month with a sales increase of 1.7 per cent in value terms and 1.3 per cent on a volume basis. The prevalence of bargains and deals nudged consumers into spending and buying basics, but there was also evidence of a little surge in more expensive, added-value assortments as shoppers indulged themselves.

Electronics and appliance stores took full advantage of a bargain-hunting shopper, delivering a remarkable 7.2 per cent uplift in sales. And even furniture stores, where sales and been terrible for a while, managed to put in a flat performance over last year. There might be some temptation to believe these things represent the bottoming out of the slump in home-related spending. However, we are not so sure this is the case. We think some of the numbers are driven by latent demand pulled from June, and from a one-off spike thanks to the extensive deals and offers.

The star channel was non-store retail where sales increased by 11.6 per cent. This is mostly thanks to Amazon’s Prime Day which, in itself, generated a nice uplift, but also threw a halo around the rest of online retail as other retailers joined in with their own promotions and discounting events.

While this month has provided retail with a moment in the sun, there are some notes of caution. First is that the margin and profit picture may not be as rosy as the sales results suggest. Second, is that July is likely an exception rather than a rule for spending growth. But, as there are other important events ahead, retailers can take comfort from the fact the consumer is still showing up during banner sales periods.