Business

Retail sales rise 0.2% after discounting by department stores

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Media captionKate Davies, from the ONS, says there is an underlying pattern of moderate growth

UK retail sales rose by 0.2% in June from the month before, helped by department store discounts.

The Office for National Statistics said the figure meant sales were up 2.2% from a year earlier.

June's modest rise compares with May's strong growth of 2.1%, but will add to hopes of UK economic revival.

The current heatwave is also boosting hopes that retail sales growth will continue. Analysts said the good weather would help consumer confidence.

"The weather will have lifted consumers' spirits and willingness to spend, as will a recent series of positive economic indicators including increased housing activity, stable inflation and a small rise in lending," said Ian Geddes, UK head of retail at Deloitte.

That sentiment was echoed by Peter Saville, partner at the advisory and restructuring firm Zolfo Cooper.

"The sun is certainly shining on the UK High Street. Retailers have reacted well to the warm weather by discounting products and offering good value to their customers as the retail recovery gains momentum.

"Retailers need to make sure they capitalise on this warm weather so that they can thrive well beyond the current heatwave," he added.

Department stores boost

Sales in June at non-specialist stores, including department stores, grew at their strongest rate since March 2012, rising 3% on the month.

The department stores sales rise was boosted by clearance sales and promotions.

The ONS figures translate to growth in the sector of 0.9% over the second quarter, a rise that will push up overall gross domestic product by 0.1%.

The retail industry accounts for about 5.7% of the economy.

Supermarkets' food sales volumes fell slightly by 0.1% in June, while non-food stores grew 0.6%, the ONS said.

The month saw weekly spending across all retail sectors reach £6.9bn, up from £6.8bn in May.

However, consumer spending remains under pressure from inflation, which is outstripping wage growth. This week, data showed that the annual rate of inflation rose to 2.9% in June, while annual wage growth, excluding bonuses, was 1% in the three months to May 30.

Momentum

Victoria Clarke, economist at Investec, said: "It looks like retail sales held up relatively well through the course of the second quarter.

"This will be a decent contribution to GDP, certainly suggesting that the spending momentum of consumers is continuing despite inflation continuing to squeeze household earnings."

Chris Williamson, chief economist at Markit, said: "A further increase in retail sales in June rounds off a good second quarter for retailers, with spending growing at almost twice the rate seen in the first three months of the year.

"The data add to evidence that the pace of economic recovery has clearly picked up since earlier in the year, and there are encouraging signs that momentum will be sustained as we move into the second half of 2013."

A series of positive economic news recently has raised hopes that the economy has turned a corner.

On Wednesday, official jobs data showed another fall in unemployment, and several recent surveys have reported a turnaround in business confidence.

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