Business

UK retail sales volumes dip in June

London shoppers Image copyright AFP/Getty Images

UK retail sales volumes fell unexpectedly by 0.2% in June, after consumers bought fewer household goods, and less food and petrol.

The figures from the Office for National Statistics (ONS) also showed the annual rate of sales growth slowed to 4.0% last month from 4.7% in May.

That was the slowest annual growth rate since September 2014, and was below analysts' forecasts.

However, the ONS said the annual growth rate was still "strong".

Sales volumes in the April-to-June quarter were up 0.7% from the previous quarter.

The value of online sales in June increased by 1.4% compared with May and accounted for 12.4% of all retail sales.

Howard Archer, chief UK and European economist for IHS Global Insight, said June's sales data was "a little disappointing" but added that the figures were "not a body blow to improved second quarter growth hopes".

He noted that retail sales volumes "still rose by a decent 0.7%" in the second quarter, suggesting consumer spending made "a healthy contribution to GDP growth".

Many analysts have been expecting retail sales to do well, with recent statistics showing wage increases are picking up while inflation remains near zero.

Sales values

The ONS said average store prices were 2.9% lower in June compared with the same month a year earlier.

Ross Walker, senior UK economist at RBS, argued that sales volumes were being "flattered" by low inflation, and that sales values data painted "a much more subdued picture".

The value of sales in the second quarter rose 0.7% from the previous three months, and rose 1.3% from the second quarter of 2014.

"We are not suggesting that UK consumer demand is weak... merely that there is little evidence of demand accelerating to above-trend rates," said Mr Walker.

In the past week, the Bank of England governor Mark Carney has hinted that UK interest rates could rise "at the turn of this year", while minutes from the last meeting of Bank rate-setters suggested some members were close to voting for a rate rise.

However, Chris Williamson, chief economist at research firm Markit, said the dip in June's sales volumes and the fall in prices would strengthen the arguments for those arguing against a rate rise.

"It's always unwise to place too much emphasis on one month's data," he said.

"The retail sales fall nevertheless is a reminder that the policy outlook remains hugely uncertain."

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