U.K. retail sales rise less than forecast as weather hits food
U.K. retail sales rose less than economists forecast last month as the wettest June for a century curbed food sales and the extra public holiday for the queen’s Jubilee didn’t give a major boost to demand.
Sales including auto fuel gained 0.1 percent from May, the Office for National Statistics said today in London. The median forecast of 18 economists in a Bloomberg News survey was for a 0.6 percent increase. Excluding fuel, sales were up 0.3 percent. Food sales dropped 0.7 percent.
The U.K. suffered the most rain for a June since 1910, hampering demand on high streets. While the euro-area debt crisis and high unemployment have undermined consumer confidence in Britain, spending may improve in the second half of the year as inflation cools, Ernst & Young’s ITEM Club said this week.
“A weak labor market and subdued confidence have been a detrimental concoction for the household sector,” Blerina Uruci, an economist at Barclays Plc in London, said before the data were released. Easing inflation may “bring some relief to consumers and we expect household spending to become one of the main pillars of the expected recovery.”
A separate report from the Council of Mortgage Lenders showed gross mortgage lending fell 5 percent in June from the previous month.
The pound pared gains against the dollar after the reports, trading at $1.5657 as of 9:34 a.m. in London. U.K. government bonds stayed lower, with the yield on the 10-year gilt rising 2 basis points to 1.49 percent.
Jubilee effect
The statistics office said the extra public holiday for the Jubilee last month “appears not to have had a significant impact on retail sales.” The previous Jubilee in 2002 also failed to boost consumer spending, it said.
Mitchells & Butlers Plc, the owner of the All Bar One chain, said today that trading conditions “remain challenging with a difficult consumer environment.”
Gasoline sales fell 2.2 percent in June from May, according to today’s report. Sales of clothing and shoes rose 2.5 percent as stores brought forward summer discounts that traditionally happen in July and August, the statistics office said. Primark, the clothing retail chain owned by Associated British Foods Plc, had “good” trading in the quarter through June 23, it said this month.
From a year earlier, sales were up 1.6 percent in June. In the three months through June, overall retail sales fell 0.7 percent, the weakest quarterly performance since January-March 2010. Excluding fuel, retail sales rose 0.3 percent in June from May and increased 2.2 percent from a year earlier.
U.K. inflation
The Bank of England said this week that economic growth this year will be “roughly flat.” It also said it’s “less likely” inflation expectations will become ingrained in the economy. Data this week showed U.K. inflation unexpectedly slowed to 2.4 percent in June from 2.8 percent in May, moving closer to the central bank’s 2 percent target.
According to today’s report, shop prices as measured by the retail sales deflator rose an annual 0.3 percent in June, the least since October 2009. The monthly price deflator was down 1.3 percent, the biggest decline since December 2008.
The annual deflator on food was 2.2 percent, the lowest in two years.
Bank of England policy makers split 7-2 at their meeting this month when they increased their bond-purchase target to 375 billion pounds. Minutes of their July 4-5 meeting, published yesterday, showed most officials felt that the case for more stimulus was “compelling.”